PACE4 (SPC4), a member of the subtilisin-like proprotein convertase (SPC) family of proteases that cleave at paired basic amino acids, exhibits a dynamic expression pattern during embryogenesis and colocalizes with bone morphogenetic proteins (BMPs). Recently Cui et al. reported that the ectopic expression of α1-antitrypsin variant Portland (α1-PDX), an engineered serpin that contains the minimal SPC consensus motif in its reactive loop, blocks the proteolytic activation of BMP4, leading to abnormal embryogenic development [Cui, Y. et al. (1998) EMBO J. 17, 4735-4743]. TGF β-related factors such as BMPs are synthesized as inactive precursors and activated by limited proteolysis at multibasic amino acids. Therefore, an α1-PDX-inhibitable protease is thought to participate in BMP activation. However, conflicting properties, including sensitivity to α1-PDX, have been reported for PACE4. In this study, we examined whether α1-PDX is responsible for the inhibition of PACE4 by measuring the protease/inhibitor complex directly. Here we show that α1-PDX has the ability to form an SDS-stable acyl-intermediate (180 kDa) with PACE4 in vivo and in vitro. Further, we characterized the PACE4 secreted into the culture medium from Cos-1 cells by a specific immunological assay. An α1-PDX-insensitive and decanoyl-RVKR-chloromethylketone-sensitive 60-kDa protease (s) is greatly activated in conditioned medium by PACE4 overexpression, suggesting that the activation of an unknown protease (s) other than PACE4 is the cause of the variation in the properties of PACE4. PACE4 is a Ca²⁺ -dependent protease with an optimal Ca²⁺ requirement of 2mM, and shows its highest activity at weakly basic pH. PACE4 activity is completely inhibited by EDTA and EGTA, but not by leupeptin. These results show that PACE4 activity can be inhibited by α1-PDX as well as furin (SPC1) and suggest that the inhibition of PACE4-mediated activation of factors such as BMPs by α1-PDX causes abnormal embryogenic development.