Cyclin E is a G(1) cyclin essential for S-phase entry and has a profound role in oncogenesis. Previously this laboratory found that cyclin E is overexpressed and present in lower-molecular-weight (LMW) isoforms in breast cancer cells and tumor tissues compared to normal cells and tissues. Such alteration of cyclin E is linked to poor patient outcome. Here we report that the LMW forms of cyclin E are hyperactive biochemically and they can more readily induce G(1)-to-S progression in transfected normal cells than the full-length form of the protein can. Through biochemical and mutational analyses we have identified two proteolytically sensitive sites in the amino terminus of human cyclin E that are cleaved to generate the LMW isoforms found in tumor cells. Not only are the LMW forms of cyclin E functional, as they phosphorylate substrates such as histone H1 and GST-Rb, but also their activities are higher than the full-length cyclin E. These nuclear localized LMW forms of cyclin E are also biologically functional, as their overexpression in normal cells increases the ability of these cells to enter S and G(2)/M. Lastly, we show that cyclin E is selectively cleaved in vitro by the elastase class of serine proteases to generate LMW forms similar to those observed in tumor cells. These studies suggest that the defective entry into and exit from S phase by tumor cells is in part due to the proteolytic processing of cyclin E, which generates hyperactive LMW isoforms whose activities have been modified from that of the full-length protein.