The submandibular gland (SMG) develops under the epithelial-mesenchymal interaction. Its process is regulated by various growth/differentiation factors, which are synthesized as inactive precursors and activated via the limited proteolysis at their multi basic amino acid site(s) such as Arg-X-Lys/Arg-Arg. Although many of these processing steps are elucidated to be catalyzed by subtilisin-like proprotein convertases (SPCs), little is known about the role of SPCs in the SMG development. Here, we focused upon the physiological role of PACE4 (SPC4), a member of SPC family, in the SMG development. In the organ culture system of rat embryonic SMG (E15), Dec-RVKR-CMK, a potent inhibitor for SPCs, inhibited the salivary branching and the expression of an exocrine gland type water channel, AQP5. However, other peptidyl-CMKs and inhibitors for trypsin-like serine proteases including leupeptin did not affect the salivary branching and AQP5 expression. Dec-RVKR-CMK also suppressed the expression of PACE4, but not furin, another member of the family. The specific antibody for the catalytic domain of PACE4 suppressed the salivary branching and AQP5 expression similarly. These inhibitory effects of Dec-RVKR-CMK were partially rescued by the addition of recombinant BMP2 whose precursor is a candidate for the physiological substrates of PACE4. Further, the transcriptional silencing of PACE4 by its specific siRNAs caused the suppression of both the salivary branching and AQP5 expression in the present organ culture system. These observations strongly support the idea that PACE4 mediates the SMG development.