Interleukin 1 (IL-1) is a lymphokine secreted by monocytes in response to a variety of inflammatory stimuli. IL-1 beta, the predominant form of IL-1 produced by human monocytes, is synthesized as an inactive precursor of 31 kDa and is cleaved at Asp116-Ala117 to yield a 17.5-kDa extracellular form. The exact cellular site of cleavage and mechanism of secretion is at present unknown. We have prepared cell-free postnuclear extracts from freshly isolated human monocytes as well as THP.1 cells, a human monocyte-like cell line, and various blood lymphocytes and fibroblast cell lines. Using pre-IL-1 beta synthesized by in vitro transcription and translation, we have shown that only extracts derived from human monocytes and THP.1 cells were capable of cleaving precursor IL-1 beta to authentic mature IL-1 beta. Subcellular fractionation of the extracts suggested that the processing activity is found in the cytosol of monocytes or monocyte-like cell lines. The cleavage product of this protease is identical to authentic IL-1 beta as shown by mobility on SDS/PAGE and amino acid sequence analysis of the [3H]leucine-labeled product. The cleavage product is also capable of binding to the IL-1 receptor found on fibroblast membranes. Finally, mutation of Asp116----Ala116 rendered the IL-1 beta precursor resistant to cleavage by the processing activity. We conclude that a protease activity found only in monocytes will specifically process IL-1 beta to an active form.