Activation of furin requires autoproteolytic cleavage of its 83‐amino acid propeptide at the consensus furin site, Arg‐Thr‐Lys‐Arg107↓. This RER‐localized cleavage is necessary, but not sufficient, for enzyme activation. Rather, full activation of furin requires exposure to, and correct routing within, the TGN/endosomal system. Here, we identify the steps in addition to the initial propeptide cleavage necessary for activation of furin. Exposure of membrane preparations containing an inactive RER‐localized soluble furin construct to either:(i) an acidic and calcium‐containing environment characteristic of the TGN; or (ii) mild trypsinization at neutral pH, resulted in the activation of the endoprotease. Taken together, these results suggest that the pH drop facilitates the removal of a furin inhibitor. Consistent with these findings, following cleavage in the RER, the furin propeptide remains associated with the enzyme and functions as a potent inhibitor of the endoprotease. Co‐immunoprecipitation studies coupled with analysis by mass spectrometry show that release of the propeptide at acidic pH, and hence activation of furin, requires a second cleavage within the autoinhibitory domain at a site containing a P6 arginine (‐Arg70‐Gly‐Val‐Thr‐Lys‐Arg75↓‐). The significance of this cleavage in regulating the compartment‐specific activation of furin, and the relationship of the furin activation pathway to those of other serine endoproteases are discussed.