EMR2 is a human myeloid-restricted member of the EGF-TM7 receptor family that contains a highly conserved G protein-coupled receptor proteolysis site (GPS) in the membrane-proximal region. Here the post-translational proteolytic cleavage of EMR2 at GPS was investigated. We show the cleavage occurs at Leu517-Ser518 and is independent of the transmembrane domains. The non-covalent association of the resulting extracellular alpha-subunit and transmembrane beta-subunit requires a minimum of eight amino acids in the beta-subunit. The GPS motif is necessary, but not sufficient for receptor cleavage, which requires the entire extracellular stalk. Thus, an alternatively spliced EMR2 isoform with a truncated stalk fails to undergo proteolytic cleavage. Alternative splicing therefore provides a means to regulate GPS cleavage, producing receptors with two distinct structures.