Polycystin-1 plays an essential role in renal tubular morphogenesis, and disruption of its function causes cystogenesis in human autosomal-dominant polycystic kidney disease (ADPKD). We demonstrated that polycystin-1 undergoes cleavage at G protein coupled receptor proteolytic site in a process that requires the receptor for egg jelly domain. Most of the N-terminal fragment remains tethered at the cell surface, although a small amount is secreted. PKD1-associated mutations in the receptor for egg jelly domain disrupt cleavage, abolish the ability of polycystin-1 to activate signal transducer and activator of transcription-1, and induce tubulogenesis in vitro. We conclude that the cleavage of polycystin-1 is likely essential for its biologic activity.