The semaphorins are a large group of cell surface and secreted proteins implicated in axonal pathfinding. Here we show that the secreted mouse semaphorin D (SemD) is synthesized as an inactive precursor (proSemD) and becomes repulsive for sensory and sympathetic neurites upon proteolytic cleavage. ProSemD processing can be blocked completely by an inhibitor selective for furin-like endoproteases or mutagenesis of three conserved dibasic cleavage sites. Its C-terminal pro-peptide contains a processing signal that is essential for SemD to acquire its full repulsive activity. SemD processing is regulated during the embryonic development of the mouse and determines the magnitude of its repulsive activity. Similarly to SemD, the secreted semaphorins SemA and SemE display repulsive properties that are regulated by processing. Our data suggest that differential proteolytic processing determines the repulsive potency of secreted semaphorins and implicate proteolysis as an important regulatory mechanism in axonal pathfinding.