Pseudomonas exotoxin (PE) was incubated with cells and extracts analyzed for processed fragments. PE was proteolytically cleaved to produce a N-terminal 28-kDa and a C-terminal 37-kDa fragment, the latter being composed of a portion of domain II and all of domain III (the ADP-ribosylating domain). Cleavage was evident at 10 min after toxin addition and endosome preparations contained the processed fragments. Initially, the two fragments were linked by a disulfide bond. Subsequently, the 37-kDa fragment was reduced and translocated to the cytosol where it inactivated protein synthesis. Cytosol from toxin-treated cells was greatly enriched in the 37-kDa fragment. The 37-kDa fragment appears to be essential for toxicity since mutant PE molecules that do not produce this fragment, or cannot deliver it to the cytosol, fail to kill cells.