Apolipoprotein A-II is the second most abundant polypeptide found in human plasma high density lipoprotein particles. The primary translation product of human apo-A-II mRNA is a prepropolypeptide. We have previously reported (Gordon, J. I., Sims, H. F., Edelstein, C., Scanu, A. M., and Strauss, A. W. (1984) J. Biol. Chem. 259, 15556-15563) that the prosegment of apo-A-II was removed following export from a human hepatoma cell line (Hep G2). This represented a novel processing compartment for prosegments terminating with paired basic residues and differed from the processing of proalbumin which occurred with high efficiency prior to export from these cells. We have now characterized the enzyme responsible for this extracellular cleavage. The proapo-A-II converting activity is blocked by the thiol protease inhibitors antipain, E-64, leupeptin, and Ala-Lys-Arg chloromethyl ketone. Incubation of 125I-iodotyrosylated Ala-Lys-Arg chloromethyl ketone with serum-free media harvested from cell cultures over a 12-h period revealed a time-dependent accumulation of a 54-kDa protease. Although small quantities of the 54-kDa protease were detected in cell lysates, the major intracellular sequences labeled by the affinity probe had masses of 31.5 and 6 kDa. The 54-kDa extracellular, as well as 31.5- and 6-kDa intracellular, species were all immunoprecipitated by monospecific anti-human liver cathepsin B IgG. Addition of this antibody to media inhibited extracellular conversion of proapo-A-II to the mature protein. Based on these observations, we conclude that a "pro" cathepsin B-like protease exported by Hep G2 cells is responsible for proapo-A-II prosegment removal. It appears that cathepsin B-like proteases exhibit a complex pattern of segregation within the secretory pathway and that larger molecular weight forms of cathepsin B-like proteases are capable of accurately processing propolypeptides.