We characterized Escherichia coli GlpG as a membrane-embedded protease and a possible player in the regulated intramembrane proteolysis in this organism. From the sequence features, it belongs to the widely conserved rhomboid family of membrane proteases. We verified the expected topology of GlpG, and it traverses the membrane six times. A model protein having an N-terminal and periplasmically localized beta-lactamase (Bla) domain, a LacY-derived transmembrane region, and a cytosolic maltose binding protein (MBP) mature domain was found to be GlpG-dependently cleaved in vivo. This proteolytic reaction was reproduced in vitro using purified GlpG and purified model substrate protein, and the cleavage was shown to occur between Ser and Asp in a region of high local hydrophilicity, which might be located in a juxtamembrane rather than an intramembrane position. The conserved Ser and His residues of GlpG were essential for the proteolytic activities. Our results using several variant forms of the model protein suggest that GlpG recognizes features of the transmembrane regions of substrates. These results point to a detailed molecular mechanism and cellular analysis of this interesting class of membrane-embedded proteases.