Vertebrate bone morphogenetic protein 1 (BMP-1) and Drosophila Tolloid (TLD) are prototypes of a family of metalloproteases with important roles in various developmental events. BMP-1 affects morphogenesis, at least partly, via biosynthetic processing of fibrillar collagens, while TLD affects dorsal-ventral patterning by releasing TGF beta-like ligands from latent complexes with the secreted protein Short Gastrulation (SOG). Here, in a screen for additional mammalian members of this family of developmental proteases, we identify novel family member mammalian Tolloid-like 2 (mTLL-2) and compare enzymatic activities and expression domains of all four known mammalian BMP-1/TLD-like proteases [BMP-1, mammalian Tolloid (mTLD), mammalian Tolloid-like 1 (mTLL-1), and mTLL-2]. Despite high sequence similarities, distinct differences are shown in ability to process fibrillar collagen precursors and to cleave Chordin, the vertebrate orthologue of SOG. As previously demonstrated for BMP-1 and mTLD, mTLL-1 is shown to specifically process procollagen C-propeptides at the physiologically relevant site, while mTLL-2 is shown to lack this activity. BMP-1 and mTLL-1 are shown to cleave Chordin, at sites similar to procollagen C-propeptide cleavage sites, and to counteract dorsalizing effects of Chordin upon overexpression in Xenopus embryos. Proteases mTLD and mTLL-2 do not cleave Chordin. Differences in enzymatic activities and expression domains of the four proteases suggest BMP-1 as the major Chordin antagonist in early mammalian embryogenesis and in pre- and postnatal skeletogenesis. (C) 1999 Academic Press.