Bone morphogenetic protein (BMP)-1, which belongs to the tolloid subgroup of astacin-like zinc metalloproteinases, cleaves the C-propeptides of procollagen at the physiologic site and is, therefore, a procollagen C-proteinase (PCP). Cleavage occurs between a specific alanine or glycine residue (depending on the procollagen chain) and an invariant aspartic acid residue in each of the three chains of procollagen. To learn more about how BMP-1 exhibits PCP activity we mapped the primary structure of BMP-1 onto the x-ray crystal structure of astacin and identified residues in the metalloproteinase domain of BMP-1 for subsequent site-directed mutagenesis studies. Recombinant wild-type and mutant BMP-1 were expressed in COS-7 cells and assayed for PCP activity using type I procollagen as the substrate. We showed that substitution of alanine for Glu(94), which occurs in the HEXXH zinc-binding motif of BMP-1, abolishes PCP activity. Furthermore, mutation of residues Lys(87) and Lys(176), which are located in the S1' pocket of the enzyme and are therefore adjacent to the P1' residue in the substrate, reduced the proteolytic activity of BMP-1 by approximately 50%. A surprising observation was that mutation of Cys(66) reduced the activity to 20%, suggesting that this residue is crucial for activity. Further experiments showed that Cys(66) and Cys(63), which are located in the tolloid-specific sequence Cys(63)-Gly(64)-Cys(65)-Cys(66) in the active site, most likely form a disulfide bridge.