Mouse hepatitis virus (MHV) is a 31-kb positive-strand RNA virus that is replicated in the cytoplasm of infected cells by a viral RNA-dependent RNA polymerase, termed the replicase. The replicase is encoded in the 5'-most 22 kb of the genomic RNA, which is translated to produce a polyprotein of >800 kDa. The replicase polyprotein is extensively processed by viral and perhaps cellular proteinases to give rise to a functional replicase complex. To date, two of the MHV replicase-encoded proteinases, papain-like proteinase 1 (PLP1) and the poliovirus 3C-like proteinase (3CLpro), have been shown to process the replicase polyprotein. In this report, we describe the cloning, expression, and activity of the third MHV proteinase domain, PLP2. We show that PLP2 cleaves a substrate encoding the first predicted membrane-spanning domain (MP1) of the replicase polyprotein. Cleavage of MP1 and release of a 150-kDa intermediate, p150, are likely to be important for embedding the replicase complex in cellular membranes. Using an antiserum (anti-D11) directed against the C terminus of the MP1 domain, we verified that p150 encompasses the MP1 domain and identified a 44-kDa protein (p44) as a processed product of p150. Pulse-chase experiments showed that p150 is rapidly generated in MHV-infected cells and that p44 is processed from the p150 precursor. Protease inhibitor studies revealed that unlike 3CLpro activity, PLP2 activity is not sensitive to cysteine protease inhibitor E64d. Furthermore, coexpression studies using the PLP2 domain and a substrate encoding the MP1 cleavage site showed that PLP2 acts efficiently in trans. Site-directed mutagenesis studies confirmed the identification of cysteine 1715 as a catalytic residue of PLP2. This study is the first to report enzymatic activity of the PLP2 domain and to demonstrate that three distinct viral proteinase activities process the MHV replicase polyprotein.