The K1 killer toxin of Saccharomyces cerevisiae consists of 103- and 83-residue alpha and beta components whose derivation, from a 316-residue precursor preprotoxin, requires processing at the alpha N-terminus (after ProArg-44), the alpha C-terminus (after ArgArg-149) and at the beta N-terminus (after LysArg-233). These processing events occur after translocation to the Golgi and have been investigated using beta-lactamase fusions. Signal peptidase cleavage of the precursor, predicted to occur after Ala-26, was confirmed by N-terminal sequence analysis of Ala-34 and Ile-52 fusions. Cleavage at all of the other predicted processing sites, including ProArg-44, is dependent on activity of the Kex2 protease. A fourth Kex2-dependent cleavage occurs at LysArg-188. Implications for the specificity of Kex2 cleavage and preprotoxin processing are discussed.