Two Ca(2+)-dependent endopeptidase activities are involved in proinsulin to insulin conversion: type I cleaves COOH-terminal to proinsulin Arg31-Arg32 (B-chain/C-peptide junction); and type II preferentially cleaves at the Lys64-Arg65 site (C-peptide/A-chain junction). To further understand the mechanism of proinsulin processing, we have investigated types I and II endopeptidase processing of intact proinsulin in parallel to that of the conversion intermediates, des-31,32-proinsulin and des-64,65-proinsulin. The type I processed des-64,65-proinsulin and proinsulin at the same rate. In contrast, the type II endopeptidase processed des-31,32-proinsulin at a much faster rate (> 19-fold; p < 0.001) than it did intact proinsulin. Furthermore, unlabeled proinsulin concentrations required for competitive inhibition of 125I-labeled des-64,65-proinsulin and 125I-proinsulin processing by a purified insulin secretory granule lysate were similar (ID50 = 14-16 microM), whereas inhibition of 125I-labeled des-31,32-proinsulin processing required a higher nonradiolabeled proinsulin concentration (ID50 = 197 microM). Synthetic peptides corresponding to the sequences surrounding Lys64-Arg65 (AC-peptide/substrate) and Arg31-Arg32 (BC-peptide/substrate) of human proinsulin were synthesized for use as specific substrates or competitive inhibitors. Cleavage of the BC-substrate by type I and AC-substrate by type II was COOH-terminal of the dibasic sequence, with similar Ca(2+)-and pH requirements previously observed for proinsulin cleavage. Apparent Km and Vmax for type I processing of the BC-substrate was Km = 20 microM; Vmax = 22.8 pmol/min, and for type II processing of the AC-substrate was Km = 68 microM; Vmax = 97 pmol/min. In competitive inhibition assays, the BC-peptide similarly blocked insulin secretory granule lysate processing of des-64,65-proinsulin and proinsulin (ID50 = 45-55 microM), but did not inhibit des-31,32-proinsulin processing. However, the AC-peptide preferentially inhibited insulin secretory granule lysate processing of des-31,32-proinsulin (ID50 = microM) compared to proinsulin (ID50 = 330 microM), and not des-64,65-proinsulin. We conclude that the type I endopeptidase recognized des-64,65-proinsulin and proinsulin as similar substrates, whereas the type II endopeptidase has a stronger preference for des-31,32-proinsulin compared to intact proinsulin. Furthermore, we suggest that in intact proinsulin there exists a constraint to efficient processing that is relieved following type I processing. Structural flexibility, in addition to the presence of Lys64-Arg65, therefore appears to be important for type II endopeptidase specificity and may provide a molecular basis for a preferential route of proinsulin conversion via des-31,32-proinsulin.