Bone morphogenetic protein 2 (BMP2) and BMP6 are key regulators of systemic iron homeostasis. All BMPs are generated as inactive precursor proteins that dimerize and are cleaved to generate the bioactive ligand and inactive prodomain fragments, but nothing is known about how BMP2 or BMP6 homodimeric or heterodimeric precursor proteins are proteolytically activated. Here, we conducted in vitro cleavage assays, which revealed that BMP2 is sequentially cleaved by furin at two sites, initially at a site upstream of the mature ligand, and then at a site adjacent to the ligand domain, while BMP6 is cleaved at a single furin motif. Cleavage of both sites of BMP2 is required to generate fully active BMP2 homodimers when expressed in Xenopus embryos or liver endothelial cells, and fully active BMP2/6 heterodimers in Xenopus. We analyzed BMP activity in Xenopus embryos expressing chimeric proteins consisting of the BMP2 prodomain and BMP6 ligand domain, or vice versa. We show that the prodomain of BMP2 is necessary and sufficient to generate active BMP6 homodimers and BMP2/6 heterodimers, whereas the BMP6 prodomain cannot generate active BMP2 homodimers or BMP2/6 heterodimers. We examined BMP2 and BMP6 homodimeric and heterodimeric ligands generated from native and chimeric precursor proteins expressed in Xenopus embryos. Whereas native BMP6 is not cleaved when expressed alone, it is cleaved to generate BMP2/6 heterodimers when co-expressed with BMP2. Furthermore, BMP2-6 chimeras are cleaved to generate BMP6 homodimers. Our findings reveal an important role for the BMP2 prodomain in dimerization and proteolytic activation of BMP6.