Several classes of proteolytic enzymes have been proposed to have a role in the processing of precursor forms of proproteins at paired basic amino acid residues. In higher eukaryotes, a single endopeptidase has yet to fulfill the necessary criteria as the physiologically relevant convertase. The observation of proalbumin circulating in a child with a bleeding disorder caused by an unusual alpha 1-antitrypsin mutation led to speculation that the presence of this alpha 1-antitrypsin mutant was inhibitory to the convertase. This provided an additional means of characterizing the processing enzyme. In this study the yeast KEX2 enzyme, a calcium-dependent thiol protease, was found to have all the properties expected for this processing enzyme. KEX2 correctly recognized and cleaved the prosequence in proalbumin. In addition, KEX2 was specifically inhibited by the mutant alpha 1-antitrypsin but not by other serine protease inhibitors.