Procollagen C-proteinase (PCP) removes the C-terminal pro-peptides of procollagens and also processes other matrix proteins. The major splice form of the PCP is termed BMP1 (bone morphogenetic protein 1). Active BMP1 is composed of an astacin-like protease domain, three CUB (complement, sea urchin Uegf, BMP1) domains and one EGF-like domain. Here we compare the recombinant human full-length BMP1 with its isolated proteolytic domain to further unravel the functional influence of the CUB and EGF domains. We show that the protease domain alone cleaves truncated procollagen VII within the short telopeptide region into fragments of similar size as the full-length enzyme does. However, unlike full-length BMP1, the protease domain does not stop at this point, but degrades its substrate completely. Moreover, the protease domain cleaves other matrix proteins such as fibronectin, collagen I and collagen IV, which are left intact by the full-length enzyme. In addition, we show for the first time that thrombospondin-1 is differently cleaved by both BMP1 and its catalytic domain. In summary, our data support the concept that the C-terminal domains of BMP1 are important for substrate recognition and for controlling and restricting its proteolytic activity via exosite binding.