SummaryYeast cell wall assembly is a highly regulated and dynamic process. A class of cell surface aspartic peptidases anchored by a glycosylphosphatidylinositol (GPI) group, collectively known as yapsins, was proposed to be involved in cell wall construction. The Saccharomyces cerevisiae Yps1p, the prototypal yapsin, is processed internally within a loop region to produce an a/b two-subunit enzyme. Here we investigated the activation mechanism of GPI-anchored Yps1p and identified some of its substrates. We report that all activation steps of GPI-Yps1p take place at the cell surface and are regulated by the environmental pH. GPI-Yps1p is active in vivo at pH 6.0 and pH 3.0 and functions as a sheddase for a subset of GPI-anchored enzymes, including itself and the Gas1 glucanosyltransferase. Importantly, while native GPI-Yps1p weakly suppresses many phenotypes associated with the yeast kex2D mutant, loop mutants that interfere with conversion into the two-subunit enzyme restore the kex2D phenotypes to near wild type level. We propose that cleavage of this internal loop region plays an important regulatory function through stimulating its shedding activity. Collectively, our data provide a direct link between the pH regulation of yeast cell wall assembly and the activity of a yapsin.