Two distinct peroxisomal targeting signals (PTSs), the C-terminal PTS1 and the N-terminal PTS2, are defined. Processing of the PTS2 on protein import is conserved in higher eukaryotes. Recently, candidates for the responsible processing protease were identified from plants (DEG15) and mammals (TYSND1). We demonstrate that plants lacking DEG15 show an expressed phenotype potentially linked to reduced beta-oxidation, indicating the impact of protein processing on peroxisomal functions in higher eukaryotes. Mutational analysis of Arabidopsis (Arabidopsis thaliana) DEG15 revealed that conserved histidine, aspartic acid, and serine residues are essential for the proteolytic activity of this enzyme in vitro. This indicates that DEG15 and related enzymes are trypsin-like serine endopeptidases. Deletion of a plant-specific stretch present in the protease domain diminished, but did not abolish, the proteolytic activity of DEG15 against the PTS2-containing glyoxysomal malate dehydrogenase. Fluorescence microscopy showed that a DEG15-green fluorescent protein fusion construct is targeted to peroxisomes in planta. In vivo studies with isolated homozygous deg15 knockout mutants and complemented mutant lines suggest that this enzyme mediates general processing of PTS2-containing proteins.