We have investigated how the transmembrane precursor proARIA is processed to ARIA (acetylcholine receptor-inducing activity). Pulse-chase labeling in transfected Chinese hamster ovary (CHO) cells showed that proARIA was cleaved to release ARIA into the medium. Cell surface biotin-labeling experiments demonstrated that proARIA was first expressed on the cell surface before being rapidly cleaved to release biotin-labeled ARIA into the medium. While not essential for proteolytic cleavage of proARIA, serum or phorbol-12-myristate-13-acetate (PMA), which activates protein kinase C (PKC), was needed for the efficient release of the processed ARIA. Proteolytic cleavage was blocked by brefeldin A, suggesting that processing occurred distal to Golgi compartments, and by NH4Cl, suggesting a need for intracellular acidic compartments. Serum and PMA also stimulated ARIA release from cultured sensory neurons, suggesting that a similar regulated release mechanism occurs in neurons and may be important in determining where ARIA is released in the developing nervous system.