Sulf-1 and Sulf-2 are novel extracellular sulfatases that act on internal glucosamine 6-O-sulfate modifications within heparan sulfate proteoglycans and regulate their interactions with various signaling molecules, including Wnt ligands. Although the Sulfs are multidomain proteins, there is limited information available about how the subdomains contribute to their enzymatic and signaling activities. In this study, we found that both human Sulfs were synthesized as prepro-enzymes and cleaved by a furin-type proteinase to form disulfide-bond linked heterodimers of 75-and 50-kDa subunits. The mature Sulfs were secreted into conditioned medium, as well as retained on the cell membrane. Although the catalytic center resides in the N-terminal 75-kDa subunit, the C-terminal 50-kDa subunit was indispensable for both arylsufatase and glucosamine 6-O-sulfate-endosulfatase activity. We found that the hydrophilic regions of the Sulfs were essential for endosulfatase activity but not for arylsulfatase activity. Using Edman sequencing, we identified furin-type proteinase cleavage sites in Sulf-1 and Sulf-2. Deletion of these sequences resulted in uncleavable forms of Sulfs. The uncleavable Sulfs retained enzymatic activity. However, they were unable to potentiate Wnt signaling, which may be due to their defective localization into lipid rafts on the plasma membrane.Heparan sulfate proteoglycans (HSPGs) 2 are major components of the extracellular matrix/cell surface and regulate a variety of biological phenomena, including cell proliferation, cell migration, and differentiation (1). These effects are mediated through the ability of HSPGs to bind to a diverse repertoire of protein ligands. Among these are morphogens, growth factors, chemokines, and other classes of molecules (2, 3).HSPGs consist of multiple heparan sulfate (HS) chains covalently linked to a limited set of core proteins. The HS chains contain repeating uronic acid and glucosamine disaccharide units. The binding functions of HSPGs depend on the fine structure of the attached heparan sulfate chains where sulfation modifications occur in four positions (N-, 3-O, and 6-O of glucosamine and 2-O of uronic acid) in highly variegated, yet highly regulated patterns (3, 4). 6-O-Sulfation of glucosamine is established to be critical for certain HSPG functions in organisms from Drosophila through mammals (5, 6).Several years ago, we cloned cDNAs encoding two novel extracellular sulfatases (Sulf-1 and Sulf-2) in human and mouse (7), initiated by the identification of the Sulf-1 ortholog in the quail embryo (QSulf-1) (8). We and others showed that both Sulfs are neutral pH endosulfatases, which remove glucosamine-6-O-sulfate from internal glucosamine residues of highly sulfated subregions within heparin/HSPGs (7, 9, 10). The ability of these enzymes to modulate the heparin/HSPG interactions of a number of growth factors, morphogens, and chemokines has been confirmed in direct binding assays (9, 11-13). In some cellular contexts, the Sulfs act to promote signaling pathways (...