A crucial step in the life cycle of arenaviruses is the biosynthesis of the mature fusion-active viral envelope glycoprotein (GP) that is essential for virus-host cell attachment and entry. The maturation of the arenavirus GP precursor (GPC) critically depends on proteolytic processing by the cellular proprotein convertase (PC) subtilisin kexin isozyme-1 (SKI-1)/site-1 protease (S1P). Here we undertook a molecular characterization of the SKI-1/S1P processing of the GPCs of the prototypic arenavirus lymphocytic choriomeningitis virus (LCMV) and the pathogenic Lassa virus (LASV). Previous studies showed that the GPC of LASV undergoes processing in the endoplasmic reticulum (ER)/cis-Golgi compartment, whereas the LCMV GPC is cleaved in a late Golgi compartment. Herein we confirm these findings and provide evidence that the SKI-1/S1P recognition site RRLL, present in the SKI-1/S1P prodomain and LASV GPC, but not in the LCMV GPC, is crucial for the processing of the LASV GPC in the ER/cis-Golgi compartment. Our structure-function analysis revealed that the cleavage of arenavirus GPCs, but not cellular substrates, critically depends on the autoprocessing of SKI-1/S1P, suggesting differences in the processing of cellular and viral substrates. Deletion mutagenesis showed that the transmembrane and intracellular domains of SKI-1/S1P are dispensable for arenavirus GPC processing. The expression of a soluble form of the protease in SKI-I/S1P-deficient cells resulted in the efficient processing of arenavirus GPCs and rescued productive virus infection. However, exogenous soluble SKI-1/S1P was unable to process LCMV and LASV GPCs displayed at the surface of SKI-I/S1P-deficient cells, indicating that GPC processing occurs in an intracellular compartment. In sum, our study reveals important differences in the SKI-1/S1P processing of viral and cellular substrates.