The interleukin-1 beta-converting enzyme is a heterodimeric cysteine protease that is produced as a 45-kDa precursor. The full-length precursor form of the enzyme was expressed in Escherichia coli as insoluble inclusion bodies. Following solubilization and refolding of the 45-kDa protein, autoproteolytic conversion to a heterodimeric form containing 10- and 20-kDa subunits was observed. This enzyme had catalytic activity against both natural (interleukin-1 beta precursor) and synthetic peptide substrates. The inclusion of a specific inhibitor (SDZ 223-941) of the converting enzyme in the refolding mixture prevented proteolytic processing to the 10-/20-kDa form. Similarly, refolding under nonreducing conditions also prevented processing. Time course experiments showed that the 10-kDa subunit was released from the 45-kDa precursor before the 20-kDa subunit, implying that the N-terminal portion of the precursor is released last and may play a regulatory role.