A chlamydia-secreted protein designated CPAF (chlamydial proteasome-like activity factor) was shown previously to degrade host transcriptional factors (e.g. RFX5) required for major histocompatibility (MHC) gene activation. Although CPAF is encoded by a single open reading frame (ORF) in the chlamydial genome, two fragments designated CPAFn and CPAFc were the main products purified. The current study was designed to test whether cleavage of CPAF into CPAFn and CPAFc is a physiological process required for CPAF proteolytic activity. Pulse–chase experiments revealed that CPAF was initially synthesized in chlamydia-infected cells as a 70 kDa full-length protein and rapidly cleaved into CPAFn and c fragments. Full-length CPAF expressed via a transgene in mammalian cells remained uncleaved and had no proteolytic activity, whereas CPAF expressed in Escherichia coli cells was processed and possessed RFX5 degradation activity. CPAF mutants deficient in processing even when expressed by E. coli failed to degrade RFX5. More importantly, the RFX5 degradation activity was partially restored when the mutant CPAF was artificially induced to undergo cleavage. These observations together have demonstrated that cleavage of CPAF is both necessary and sufficient for CPAF activity.