Laminin-5 is a typical component of several epithelial tissues and contains a unique gamma2 chain which can be proteolytically processed by BMP-1. This occurs in the N-terminal half of the gamma2 chain (606 residues), which consists of two rod-like tandem arrays of LE modules, LE1-3 and LE4-6, that flank a globular L4m module containing the cleavage site. Recombinant analysis of L4m, which includes an additional imperfect LE module essential for proper folding, demonstrated an unusual pattern of disulfide bonding. These connectivities prevented the release of gamma2LE1-3L4 m after BMP-1 cleavage which required in addition disulfide reshuffling by isomerases. The liberated segment bound through its L4 m module to heparin, nidogen-1, fibulin-1 and fibulin-2. A further heparin/sulfatide-binding site could be attributed to some arginine residues in module LE1. The gamma2LE4-6 segment remaining in processed laminin-5 showed only a strong binding to fibulin-2. Immunological studies showed a similar partial processing in cell culture and tissues and the persistence of the released fragment in tissues. This indicated that both N-terminal regions of the gamma2 chain may have a function in vivo.