Autotaxin (NPP2) is an extracellular protein that is upregulated in various malignancies, including breast and lung cancer. It potently stimulates cell proliferation, cell motility and angiogenesis, which is accounted for by its intrinsic lysophospholipase-D activity that generates the lipid mediators lysophosphatidic acid and sphingosine-1-phosphate. Based on its structural similarities with the better characterized nucleotide pyrophosphatase/phosphodiesterase NPP1, it has always been assumed that NPP2 is also synthesized as a type-II integral membrane protein and that extracellular NPP2 is generated from this membrane precursor. We show here, however, using domain swapping and mutagenesis experiments as well as N-terminal protein sequencing, that NPP2 is actually synthesized as a pre-pro-enzyme and that the proteolytically processed protein is secreted. Following the removal of a 27-residue signal peptide by the signal peptidase, NPP2 is subsequently cleaved by proprotein convertases (PCs). The removal of an N-terminal octapeptide by PCs is associated with an enhanced activity of NPP2 as a lysophospholipase D. These novel insights in the maturation of NPP2 have also implications for the development of NPP2 inhibitors as potential anti-cancer agents.