Paneth cells in small intestine crypts secrete microbicidal alpha-defensins, termed cryptdins, as components of enteric innate immunity. The bactericidal activity of cryptdins requires proteolytic activation of precursors by matrix metalloproteinase-7 (MMP-7; matrilysin) (Wilson, C. L., Ouellette, A. J., Satchell, D. P., Ayabe, T., Lopez-Boado, Y. S., Stratman, J. L., Hultgren, S. J., Matrisian, L. M., and Parks, W. C. (1999) Science 286, 113-117). Here, we report on the intracellular processing of cryptdin proforms in mouse Paneth cells. Peptide sequencing of MMP-7 digests of purified natural procryptdins identified conserved cleavage sites in the proregion between Ser(43) and Val(44) as well as at the cryptdin peptide N terminus between Ser(58) and Leu(59). Immunostaining co-localized precursor prosegments and mature cryptdin peptides to Paneth cell granules, providing evidence of their secretion. Extensive MMP-7-dependent procryptdin processing occurs in Paneth cells, as shown by Western blot analyses of intestinal crypt proteins and proteins from granule-enriched subcellular fractions. The addition of soluble prosegments to in vitro antimicrobial peptide assays inhibited the bactericidal activities of cryptdin-3 and -4 in trans, suggesting possible cytoprotective effects by prosegments prior to secretion. Levels of activated cryptdins were normal in small bowel of germ-free mice and in sterile implants of fetal mouse small intestine grown subcutaneously. Thus, the initiation of procryptdin processing by MMP-7 does not require direct bacterial exposure, and the basal MMP-7 content of germ-free Paneth cells is sufficient to process and activate alpha-defensin precursors. MMP-7-dependent procryptdin activation in vivo provides mouse Paneth cells with functional peptides for apical secretion into the small intestine lumen.