Increasing evidence suggests that extracellular Vpr could contribute to HIV pathogenesis through its effect on bystander cells. Soluble forms of Vpr have been detected in the sera and cerebrospinal fluids of HIV-1-infected patients, and in vitro studies have implicated extracellular Vpr as an effector of cellular responses, including G2 arrest, apoptosis and induction of cytokines and chemokines production, presumably through its ability to transduce into multiple cell types. However, the mechanism underlying Vpr release from HIV-1-producing cells remains undefined and the biological modifications that the extracellular protein may undergo are largely unknown. We provide evidence indicating that soluble forms of Vpr are present in the extracellular medium of HIV-1-producing cells. Release of Vpr in the extracellular medium did not originate from decaying or disrupted HIV-1 virions that package Vpr but rather appeared associated with HIV-1-mediated cytopathicity. Interestingly, Vpr was found to undergo proteolytic processing at a very well conserved proprotein convertase (PC) cleavage site, R(85)QRR(88) downward arrow, located within the functionally important C-terminal arginine-rich domain of the protein. Vpr processing occurred extracellularly upon close contact to cells and most likely involved a cell surface-associated PC. Consistently, PC inhibitors suppressed Vpr processing, while expression of extracellular matrix-associated PC5 and PACE4 enhanced Vpr cleavage. PC-mediated processing of extracellular Vpr led to the production of a truncated Vpr product that was defective for the induction of cell cycle arrest and apoptosis when expressed in human cells. Collectively, these results suggest that cell surface processing of extracellular Vpr by PCs might regulate the levels of active soluble Vpr.