The D1 polypeptide of photosystem II (PSII) is synthesized as a precursor that is processed by cleavage at the carboxyl terminus during assembly of the active PSII complex. A mutant of the green alga Scenedesmus obliquus, LF-1, inactive in water-splitting, lacks the D1 processing activity but assembles otherwise normal PSII complexes containing the precursor D1 molecule. We have isolated and partially purified a soluble protease from sonicated thylakoids of both wild-type S. obliquus and Pisum sativum which will process the precursor D1 molecule in PSII-enriched membranes from the LF-1 mutant to the mature size. After processing (but not before), photoactivation of these PSII membranes in the presence of manganese restores water-splitting to levels seen after photoactivation of PSII membranes from dark-grown, wild-type, cells. The protease is unable to process D1 in intact thylakoids from the LF-1 mutant but processes D1 if present during sonication of the thylakoids, indicating that processing of the carboxyl-terminal extension of D1 occurs in the lumen of the thylakoid. The processing protease from both S. obliquus and P. sativum is a single subunit enzyme of native molecular mass 33-35 kDa. Processing rate is optimal at pH 6.5. Processing in vitro is evident within 5 min and is markedly inhibited by millimolar concentrations of divalent cations (Cu, Zn greater than Mn greater than Ca, Mg) but not by any known inhibitors of the major classes of proteases. The protease is inactive against the precursors of other thylakoidal proteins and is thus distinct from the thylakoidal amino-terminal processing enzyme involved in the removal of transit peptides from cytoplasmically-synthesised proteins imported into the thylakoid lumen.