Axis formation and allocation of pluripotent progenitor cells to the germ layers are governed by the TGF-β-related Nodal precursor and its secreted proprotein convertases (PCs) Furin and Pace4. However, when and where Furin and Pace4 first become active have not been determined. To study the distribution of PCs, we developed a novel cell surface-targeted fluorescent biosensor (cell surface-linked indicator of proteolysis [CLIP]). Live imaging of CLIP in wild-type and Furin- and Pace4-deficient embryonic stem cells and embryos revealed that Furin and Pace4 are already active at the blastocyst stage in the inner cell mass and can cleave membrane-bound substrate both cell autonomously and nonautonomously. CLIP was also cleaved in the epiblast of implanted embryos, in part by a novel activity in the uterus that is independent of zygotic Furin and Pace4, suggesting a role for maternal PCs during embryonic development. The unprecedented sensitivity and spatial resolution of CLIP opens exciting new possibilities to elucidate PC functions in vivo.