A minicollagen comprising the two C-terminal domains of collagen XII (COL1 and NC1) has been expressed in insect cells and characterized biochemically. An interaction with heparin is demonstrated, which depends on the correct folding of the molecule. After secretion, minicollagen XII is immediately processed to a form lacking heparin binding ability. Processed and unprocessed trimers differ only at the level of the eight or nine C-terminal residues but they reveal different structures as judged from rotary shadowing images. Similar processing is also observed in the medium of transfected human HeLa cells. These data show that a heparin-binding site is present in the C-terminal end of the chicken collagen XII sequence and strongly suggest that proteolytic processing in the NC1 domain can occur in vivo and regulate the interactive properties of collagen XII.