Agouti-related protein (AGRP) plays a key role in energy homeostasis. The carboxyl-terminal domain of AGRP acts as an endogenous antagonist of the melanocortin-4 receptor (MC4-R). It has been suggested that the amino-terminal domain of AGRP binds to syndecan-3, thereby modulating the effects of carboxyl-terminal AGRP at the MC4-R. This model assumes that AGRP is secreted as a full-length peptide. In this study we found that AGRP is processed intracellularly after Arg₇₉-Glu₈₀-Pro₈₁-Arg₈₂. The processing site suggests cleavage by proprotein convertases (PCs). RNA interference and overexpression experiments showed that PC1/3 is primarily responsible for cleavage in vitro, although both PC2 and PC5/6A can also process AGRP. Dual in situ hybridization demonstrated that PC1/3 is expressed in AGRP neurons in the rat hypothalamus. Moreover, hypothalamic extracts from PC1-null mice contained 3.3-fold more unprocessed full-length AGRP, compared with wild-type mice, based on combined HPLC and RIA analysis, demonstrating that PC1/3 plays a role in AGRP cleavage in vivo. We also found that AGRP_83–132 is more potent an antagonist than full-length AGRP, based on cAMP reporter assays, suggesting that posttranslational cleavage is required to potentiate the effect of AGRP at the MC4-R. Because AGRP is cleaved into distinct amino-terminal and carboxyl-terminal peptides, we tested whether amino-terminal peptides modulate food intake. However, intracerebroventricular injection of rat AGRP_25–47 and AGRP_50–80 had no effect on body weight, food intake, or core body temperature. Because AGRP is cleaved before secretion, syndecan-3 must influence food intake independently of the MC4-R.