Prostate derived factor (PDF) is a member of transforming growth factor‐β (TGF‐β) superfamily proteins involved in differentiation of the prostate epithelium. Proprotein convertases (PCs) such as furin are thought to mediate the processing of TGF‐β superfamily. In the present study, we demonstrated for the first time that human prostate cancer cell lines differentially synthesize and secret prostate derived factor (PDF), and that PDF secreted by LNCaP is processed by PCs. Exposure of LNCaP cells to the decanoyl‐Arg‐Val‐Lys‐Arg‐chloromethylketone (CMK), a synthetic furin‐like protease inhibitor, inhibited PDF processing and resulted in the loss of luminal cell phenotype and induction of basal cell phenotype in LNCaP cells as demonstrated by alternations in the expression of cytokeratins 8, 14, 18, and 19, markers of prostate epithelial cell differentiation. These results suggest that proprotein convertases may be involved in the regulation of prostate epithelial cell differentiation, and may be an important target of prostate cancer therapy. J. Cell. Biochem. 88: 394–399, 2003. © 2002 Wiley‐Liss, Inc.