In skin, basal keratinocytes in the epidermis are tightly attached to the underlying dermis by the basement membrane (BM). The correct expression of hemidesmosomal and extracellular matrix (ECM) proteins is essential for BM formation, and the null-expression of one molecule may induce blistering diseases associated with immature BM formation in humans. However, little is known about the significance of post-translational processing of hemidesmosomal or ECM proteins in BM formation. Here we show that the C-terminal cleavage of hemidesmosomal transmembrane collagen XVII (COL17) is essential for correct BM formation. The homozygous p.R1303Q mutation in COL17 induces BM duplication and blistering in humans. Although laminin 332, a major ECM protein, interacts with COL17 around p.R1303, the mutation leaves the binding of both molecules unchanged. Instead, the mutation hampers the physiological C-terminal cleavage of COL17 in the ECM. Consequently, non-cleaved COL17 ectodomain remnants induce the aberrant deposition of laminin 332 in the ECM, which is thought to be the major pathogenesis of the BM duplication that results from this mutation. As an example of impaired cleavage of COL17, this study shows that regulated processing of hemidesmosomal proteins is essential for correct BM organization in skin.