Upon activation, the apoptosis‐inducing cell membrane receptor CD95 (APO‐1/Fas) recruits a set of intracellular signaling proteins (CAP1‐4) into a death‐inducing signaling complex (DISC). In the DISC, CAP1 and CAP2 represent FADD/MORT1. CAP4 was identified recently as an ICE‐like protease, FLICE, with two death effector domains (DED). Here we show that FLICE binds to FADD through its N‐terminal DED. This is an obligatory step in CD95 signaling detected in the DISC of all CD95‐sensitive cells tested. Upon prolonged triggering of CD95 with agonistic antibodies all cytosolic FLICE gets proteolytically activated. Physiological FLICE cleavage requires association with the DISC and occurs by a two‐step mechanism. Initial cleavage generates a p43 and a p12 fragment further processed to a p10 fragment. Subsequent cleavage of the receptor‐bound p43 results in formation of the prodomain p26 and the release of the active site‐containing fragment p18. Activation of FLICE is blocked by the peptide inhibitors zVAD‐fmk, zDEVD‐fmk and zIETD‐fmk, but not by crmA or Ac‐YVAD‐CHO. Taken together, our data indicate that FLICE is the first in a cascade of ICE‐like proteases activated by CD95 and that this activation requires a functional CD95 DISC.