Proteolytic degradation of the major cartilage macromolecules, aggrecan and type II collagen, is a key pathological event in osteoarthritis (OA). ADAMTS-4 and ADAMTS-5, the primary aggrecanases capable of cartilage aggrecan cleavage, are synthesized as latent enzymes and require prodomain removal for activity. The N-termini of the mature proteases suggest that activation involves a proprotein convertase, but the specific family member responsible for aggrecanase activation in cartilage in situ has not been identified. Here we describe purification of a proprotein convertase activity from human OA cartilage. Through biochemical characterization and the use of siRNA, PACE4 was identified as a proprotein convertase responsible for activation of aggrecanases in osteoarthritic and cytokine-stimulated cartilage. Posttranslational activation of ADAMTS-4 and ADAMTS-5 was observed in the extracellular milieu of cartilage, resulting in aggrecan degradation. These findings suggest that PACE4 represents a novel target for the development of OA therapeutics.