Betacellulin (BTC) belongs to the family of epidermal growth factor (EGF)-like growth factors that are expressed as transmembrane precursors and undergo proteolytic ectodomain shedding to release soluble mature ligands. BTC is a dual-specificity ligand for ErbB1 and ErbB4 receptors, and can activate unique signal-transduction pathways that are beneficial for the function, survival and regeneration of pancreatic beta-cells. We have previously shown that BTC precursor (proBTC) is cleaved by ADAM10 to generate soluble ligand and a stable, transmembrane remnant (BTC-CTF). In this study, we analyzed the fate of the BTC-CTF in greater detail. We demonstrated that proBTC is cleaved by ADAM10 to produce BTC-CTF, which then undergoes intramembrane processing by presenilin-1- and/or presenilin-2-dependent gamma-secretase to generate an intracellular-domain fragment (BTC-ICD). We found that the proBTC cytoplasmic domain is palmitoylated and that palmitoylation is not required for ADAM10-dependent cleavage but is necessary for the stability and gamma-secretase-dependent processing of BTC-CTF to generate BTC-ICD. Additionally, palmitoylation is required for nuclear-membrane localization of BTC-ICD, as demonstrated by the redistribution of non-palmitoylated BTC-ICD mutant to the nucleoplasm. Importantly, a novel receptor-independent role for BTC-ICD signaling is suggested by the ability of BTC-ICD to inhibit cell growth in vitro.