VE-cadherin trafficking to and from the plasma membrane has emerged as a critical mechanism for regulating cadherin surface levels and adhesion strength. In addition, proteolytic processing of cadherin extracellular and cytoplasmic domains has been reported to regulate cadherin adhesion and signaling. Here we provide evidence that VE-cadherin is cleaved by calpain upon entry into clathrin-enriched domains. This cleavage event occurs between the β-catenin and p120-binding domains within the cadherin cytoplasmic tail. Of interest, VE-cadherin mutants that are resistant to endocytosis are similarly resistant to cleavage. Furthermore, p120-catenin overexpression blocks cadherin internalization and cleavage, coupling entry into the endocytic pathway with proteolytic processing. Of importance, the cleavage of the VE-cadherin tail alters the postendocytic trafficking itinerary of the cadherin, resulting in a higher turnover rate due to decreased recycling and increased degradation. In conclusion, this study identifies a novel proteolytic event that regulates the trafficking of VE-cadherin after endocytosis.