All transforming growth factor beta (TGF-beta) superfamily members are synthesized as precursors with prodomain sequences that are proteolytically removed by subtilisin-like proprotein convertases (SPCs). For most superfamily members, this is believed sufficient for activation. Exceptions are TGF-betas 1 to 3 and growth differentiation factor 8 (GDF8), also known as myostatin, which form noncovalent, latent complexes with their SPC-cleaved prodomains. Sequence similarities between TGF-betas 1 to 3, myostatin, and superfamily member GDF11, also known as bone morphogenetic protein 11 (BMP11), prompted us to examine whether GDF11 might be capable of forming a latent complex with its cleaved prodomain. Here we demonstrate that GDF11 forms a noncovalent latent complex with its SPC-cleaved prodomain and that this latent complex is activated via cleavage at a single specific site by members of the developmentally important BMP1/Tolloid family of metalloproteinases. Evidence is provided for a molecular model whereby formation and activation of this complex may play a general role in modulating neural differentiation. In particular, mutant GDF11 prodomains impervious to cleavage by BMP1/Tolloid proteinases are shown to be potent stimulators of neurodifferentiation, with potential for therapeutic applications.