MrfA, a transcription factor that regulates Dictyostelium prestalk cell differentiation, is an orthologue of the animal Myelin-gene Regulatory Factor (MRF) proteins. We show that the MRFs contain a predicted trans-membrane domain, suggesting that they are synthesized as membrane-tethered proteins that are then proteolytically released. We confirm this for MrfA but report a radically different mode of processing from that of paradigmatic tethered transcriptional regulators; which are cleaved within the trans-membrane domain by a dedicated protease. Instead an auto-proteolytic cleavage mechanism, previously only described for the intramolecular chaperone domains of bacteriophage tail-spike proteins, processes MrfA and, by implication, the metazoan MRF proteins. We also present evidence that the auto-proteolysis of MrfA occurs rapidly and constitutively in the ER and that its specific role in prestalk cell differentiation is conferred by the regulated nuclear translocation of the liberated fragment.