The mature MALP-404 surface lipoprotein of Mycoplasma fermentans comprises a membrane-anchored N-terminal lipid-modified region responsible for macrophage activation (P. F. Mühlradt, M. Kiess, H. Meyer, R. Süssmuth, and G. Jung, J. Exp. Med. 185:1951-1958, 1997) and an external hydrophilic region that contains the selective lipoprotein-associated (SLA) motif defining a family of lipoproteins from diverse but selective prokaryotes, including mycoplasmas (M. J. Calcutt, M. F. Kim, A. B. Karpas, P. F. Mühlradt, and K. S. Wise, Infect. Immun. 67:760-771, 1999). This family generally corresponds to a computationally defined group of orthologs containing the basic membrane protein (BMP) domain. Two discrete lipid-modified forms of the abundant MALP product which vary dramatically in ratio among isolates of M. fermentans occur on the mycoplasma surface: (i) MALP-404, the full-length mature product, and (ii) MALP-2, the Toll-like receptor 2-mediated macrophage-activating lipopeptide containing the N-terminal 14 residues of the mature lipoprotein. The role of posttranslational processing in the biogenesis of MALP-2 from the prototype MALP-404 SLA-containing lipoprotein was investigated. Detergent phase fractionation of cell-bound products and N-terminal sequencing of a newly discovered released fragment (RF) demonstrated that MALP-404 was subject to site-specific proteolysis between residues 14 and 15 of the mature lipoprotein, resulting in the cell-bound MALP-2 and soluble RF products. This previously unknown mechanism of posttranslational processing among mycoplasmas suggests that specific cleavage of some surface proteins may confer efficient "secretion" of extracellular products by these organisms, with concurrent changes in the surface phenotype. This newly identified form of variation may have significant implications for host adaptation by mycoplasmas, as well as other pathogens expressing lipoproteins of the SLA (BMP) family.