Tractin is a member of the L1 family of cell adhesion molecules in leech. Immunoblot analysis suggests that Tractin is constitutively cleaved in vivo at a proteolytic site with the sequence RKRRSR. This sequence conforms to the consensus sequence for cleavage by members of the furin family of convertases, and this proteolytic site is shared by a majority of other L1 family members. We provide evidence with furin-specific inhibitor experiments, by site-specific mutagenesis of Tractin constructs expressed in S2 cells, as well as by Tractin expression in furin-deficient LoVo cells that a furin convertase is the likely protease mediating this processing. Cross-immunoprecipitations with Tractin domain-specific antibodies suggest that the resulting NH₂- and COOH-terminal cleavage fragments interact with each other and that this interaction provides a means for the NH₂-terminal fragment to be tethered to the membrane. Furthermore, in S2 cell aggregation assays we show that the NH₂-terminal fragment is necessary for homophilic adhesion and that cells expressing only the transmembrane COOH-terminal fragment are non-adhesive. However, tethering of exogeneously provided Tractin NH₂-terminal fragment to S2 cells expressing only the COOH-terminal fragment can functionally restore the adhesive properties of Tractin.