The prohormone convertases PC2 (SPC2) and PC3/PC1 (SPC3) are the major precursor processing endoproteases in a wide variety of neural and endocrine tissues. Both enzymes are normally expressed in the islet beta cells and participate in proinsulin processing. Recently we generated mice lacking active PC2 due to a disruption of the PC2 gene (Furuta, M., Yano, H., Zhou, A., Rouillé, Y., Holst, J. J., Carroll, R. J., Ravazzola, M., Orci, L., Furuta, H., and Steiner, D. F. (1997) Proc. Natl. Acad. Sci. U. S. A. 94, 6646-6651). Here we report that these PC2 mutant mice have elevated circulating proinsulin, comprising 60% of immunoreactive insulin-like components. Acid ethanol extractable proinsulin from pancreas is also significantly elevated, representing about 35% of total immunoreactive insulin-like components. These increased amounts of proinsulin are mainly stored in secretory granules, giving rise to an altered appearance on electron microscopy. In pulse-chase experiments, the mutant islets incorporate lesser amounts of isotopic amino acids into insulin-related components than normal islets. In both wild-type and mutant islets, proinsulin I was processed more rapidly to insulin, reflecting the preference of both PC2 and PC3 for substrates having a basic amino acid positioned four residues upstream of the cleavage site. The overall half-time for the conversion of proinsulin to insulin is increased approximately 3-fold in the mutant islets and is associated with a 4-5-fold greater elevation of des-31,32 proinsulin, an intermediate that is formed by the preferential cleavage of proinsulin at the B chain-C-peptide junction by PC3 and is C-terminally processed to remove Arg31 and Arg32 by carboxypeptidase E. The constitutive release of newly synthesized proinsulin from both mutant and wild-type islets during the first 1-2 h of chase was normal (<2% of total). These results demonstrate that PC2 plays an essential role in proinsulin processing in vivo, but is quantitatively less important in this regard than PC3, and that its absence does not influence the efficient sorting of proinsulin into the regulated secretory pathway.