Chemokines comprise a class of structurally related proteins that are involved in many aspects of leukocyte migration under basal and inflammatory conditions. In addition to the large number of genes, limited processing of these proteins by a variety of enzymes enhances the complexity of the total spectrum of chemokine variants. We have recently shown that the native chemokine CXCL10 is processed at the C terminus, thereby shedding the last four amino acids. The present study was performed to elucidate the mechanism in vivo and in vitro and to study the biological activity of this novel isoform of CXCL10. Using a combination of protein purification and mass spectrometric techniques, we show that the production of C-terminally truncated CXCL10 by primary keratinocytes is inhibited in vivo by a specific inhibitor of pro-protein convertases (e.g. furin) but not by inhibition of matrix metalloproteinases. Moreover, CXCL10 is processed by furin in vitro, which is abrogated by a mutation in the furin recognition site. Using GTPgammaS binding, Ca(2+) mobilization, and chemotaxis assays, we demonstrate that the C-terminally truncated CXCL10 variant is a potent ligand for CXCR3. Moreover, the inverse agonist activity on the virally encoded receptor ORF74 and the direct antibacterial activity of CXCL10 are fully retained. Hence, we have identified furin as a novel chemokine-modifying enzyme in vitro and most probably also in vivo, generating a C-terminally truncated CXCL10, which fully retains its (inverse) agonistic properties.