The neuroendocrine processing endoproteases PC2 and PC1/3 are expressed in the β cells of the islets of Langerhans and participate in the processing of proinsulin to insulin and C-peptide. We have previously shown that disruption of PC2 (SPC2) expression significantly impairs proinsulin processing. Here we report that disruption of the expression of PC1/3 (SPC3) produces a much more severe block in proinsulin conversion. In nulls, pancreatic and circulating proinsulin-like components comprise 87% and 91%, respectively, of total insulin-related immunoreactivity. Heterozygotes also show a more than 2-fold elevation in proinsulin levels to ≈12%. Immunocytochemical and ultrastructural studies of the β cells reveal the nearly complete absence of mature insulin immunoreactivity and its replacement by that of proinsulin in abundant immature-appearing secretory granules. In contrast, α cell morphology and glucagon processing are normal, and there is also no defect in somatostatin-14 generation. Pulse–chase labeling studies confirm the existence of a major block in proinsulin processing in PC1/3 nulls with prolongation of half-times of conversion by 7- and 10-fold for proinsulins I and II, respectively. Lack of PC1/3 also results in increased levels of des-64,65 proinsulin intermediates generated by PC2, in contrast to PC2 nulls, in which des- 31,32 proinsulin intermediates predominate. These results confirm that PC1/3 plays a major role in processing proinsulin, but that its coordinated action with PC2 is necessary for the most efficient and complete processing of this prohormone.