The formation of insoluble cross ␤-sheet amyloid is pathologically associated with disorders such as Alzheimer, Parkinson, and Huntington diseases. One exception is the nonpathological amyloid derived from the protein Pmel17 within melanosomes to generate melanin pigment. Here we show that the formation of insoluble M␣C intracellular fragments of Pmel17, which are the direct precursors to Pmel17 amyloid, depends on a novel juxtamembrane cleavage at amino acid position 583 between the furin-like proprotein convertase cleavage site and the transmembrane domain. The resulting Pmel17 C-terminal fragment is then processed by the ␥-secretase complex to release a shortlived intracellular domain fragment. Thus, by analogy to the Notch receptor, we designate this cleavage the S2 cleavage site, whereas ␥-secretase mediates proteolysis at the intramembrane S3 site. Substitutions or deletions at this S2 cleavage site, the use of the metalloproteinase inhibitor TAPI-2, as well as small interfering RNA-mediated knock-down of the metalloproteinases ADAM10 and 17 reduced the formation of insoluble Pmel17 fragments. These results demonstrate that the release of the Pmel17 ectodomain, which is critical for melanin amyloidogenesis, is initiated by S2 cleavage at a juxtamembrane position.Folding of proteins is a highly regulated process ensuring their correct three-dimensional structure. Under pathological circumstances, a soluble protein can be folded into highly stable cross ␤-sheet amyloid structures, which are believed to play pathological roles in disorders such as Alzheimer, Parkinson, and Huntington diseases. An exception to this general concept is the physiological amyloid structure of the melanosomal matrix formed by the protein Pmel17. Melanosomes are lysosome-related organelles that contain pigment granules (melanin) in melanocytes and retinal epithelial cells (reviewed in Ref. 1). Melanogenesis is believed to proceed through several sequential maturation steps, classified by melanosomes from stage I to stage IV. Maturation of stage II melanosomes requires the formation of Pmel17 intralumenal fibers (2, 3).Pmel17 (also called gp100, ME20, RPE1, or silver) is a type I transmembrane glycoprotein of up to 668 amino acids in humans (reviewed in Ref. 4). The requirement of Pmel17 for the generation of functional melanin has been shown in a number of different organisms, because, for example, certain point mutations in the Pmel17/silver gene result in hypopigmentation phenotypes (5-7). The most characteristic domain within Pmel17 is a specific lumenal proline/serine/threonine rich repeat domain (see Fig. 1A), that is imperfectly repeated 13 times in the M␣ fragment. Importantly, deletion of the rich repeat domain results in a complete loss of fibril formation, pointing to the requirement of Pmel17, and especially the rich repeat domain, in melanin formation (8). Pmel17 exists in different isoforms generated by alternative splicing. Pmel17-i 2 is the most abundant isoform, whereas the Pmel17-l isoform contains a 7-amino acid in...