VMA1 translational product undergoes excision of a 50-kDa intervening segment (VDE: VMA1-derived endonuclease) and religation of the flanking regions to create a 69-kDa catalytic subunit of vacuolar membrane H+-ATPase. VDEs conjugated with polypeptides at both N- and C-terminal ends were expressed in Escherichia coli and examined for their ability to catalyze self-splicing. Processed VDE was found in soluble pools, while unspliced precursors accumulated in insoluble pools, forming inclusion bodies. We demonstrate in vitro protein splicing by refolding of the denatured precursor molecules. The processing reaction efficiently occurs with the purified precursor peptide. VDE bracketed by only 6 proximal and 4 distal amino acids is autocatalytically processed.