THE Ntn (N-terminal nucleophile) hydrolases are enzymes with an unusual four-layer alpha beta fold(1-5). The amino-terminal residue (cysteine, serine or threonine) of the mature protein is the catalytic nucleophile(6-10), and its side chain is activated nucleophilic attack by transfer of its proton to the free N terminus(2), although other active-site residues may also be involved(4,8). The four currently known Ntn hydrolases (glutamine PRPP amidotransferase(1,6), penicillin acylase(2,7), the 20S proteasome(3,8,9) and aspartylglucosaminidase(4,10)) are encoded as inactive precursors, and are activated by cleavage of the peptide bond preceding the catalytic residue. It has been suggested that autocatalytic processing is a common Feature of Ntn hydrolases, and proceeds by an intramolecular mechanism determined by their common fold(5). Here we show that propeptide processing In the proteasome from Thermoplasma acidophilum is Indeed autocatalytic, but is probably intermolecular. Processing is not required for assembly, is largely unaffected by propeptide length and sequence, and occurs before beta-subunit folding is completed. Although serine is an acceptable active-site nucleophile for proteolysis, and cysteine for processing, only threonine is fully functional in both. This explains why threonine is universally conserved in active proteasome subunits.