An alpha-factor leader/insulin precursor fusion protein was produced in Saccharomyces cerevisiae and metabolically labeled in order to analyse the efficiency of maturation and secretion. A substantial fraction of the secreted material was found in a hyperglycosylated unprocessed form, indicating incomplete Kex2p endopeptidase maturation. Introduction of a spacer peptide (EAEAEAK) after the dibasic Kex2p site, creating a N-terminal extension of the insulin precursor, greatly increased the Kex2p catalytic efficiency and the fermentation yield of insulin precursor. The N-terminal extension features a Lys to allow subsequent proteolytic removal by trypsin or the Achromobacter lyticus Lys-specific protease. Dipeptidyl aminopeptidase A (DPAPA) activity removing Glu-Ala dipeptides from the extension was inhibited by adding a Glu N-terminally to the extension. Unexpectedly, this modified N-terminal extension (EEAEAEAK) was partially cleaved after the Lys during fermentation. This monobasic proteolytic activity was demonstrated to be associated with Yap3p. Yap3p cleavage could be prevented by insertion of a Pro before the Lys (EEAEAEAPK).