Mammalian asparaginyl endopeptidase (AEP) or legumain is a recently discovered lysosomal cysteine protease that specifically cleaves after asparagine residues. How this unusually specific lysosomal protease is itself activated is not fully understood. Using purified recombinant pro-enzyme, we show that activation is autocatalytic, requires sequential removal of C- and N-terminal pro-peptides at different pH thresholds, and is bimolecular. Removal of the N-terminal propeptide requires cleavage after aspartic acid rather than asparagine. Cellular processing, either of exogenously added AEP precursor or of pulse-labeled endogenous precursor, introduces at least one further cleavage to yield the final mature lysosomal enzyme. We also provide evidence that in living cells, there is clear compartmental heterogeneity in terms of AEP activation status. Moreover, we show that human monocyte-derived dendritic cells harbor inactive proforms of AEP that become activated upon maturation of dendritic cells with lipopolysaccharide.