The proprotein convertase subtilisin kexin isozyme 1 (SKI-1)/site 1 protease (S1P) plays crucial roles in cellular homeostatic functions and is hijacked by pathogenic viruses for the processing of their envelope glycoproteins. Zymogen activation of SKI-1/S1P involves sequential autocatalytic processing of its N-terminal prodomain at sites B'/B followed by the herein newly identified C'/C sites. We found that SKI-1/S1P autoprocessing results in intermediates whose catalytic domain remains associated with prodomain fragments of different lengths. In contrast to other zymogen proprotein convertases, all incompletely matured intermediates of SKI-1/S1P showed full catalytic activity toward cellular substrates, whereas optimal cleavage of viral glycoproteins depended on B'/B processing. Incompletely matured forms of SKI-1/S1P further process cellular and viral substrates in distinct subcellular compartments. Using a cell-based sensor for SKI-1/S1P activity, we found that 9 amino acid residues at the cleavage site (P1-P8) and P1' are necessary and sufficient to define the subcellular location of processing and to determine to what extent processing of a substrate depends on SKI-1/S1P maturation. In sum, our study reveals novel and unexpected features of SKI-1/S1P zymogen activation and subcellular specificity of activity toward cellular and pathogen-derived substrates.