Genetic variants in TMEM106B, coding for a transmembrane protein of unknown function, have been identified as critical genetic modulators in various neurodegenerative diseases with a strong effect in patients with frontotemporal degeneration. The luminal domain of TMEM106B can form amyloid-like fibrils upon proteolysis. Whether this luminal domain is generated under physiological conditions and which protease(s) are involved in shedding remain unclear. We developed a commercially available antibody against the luminal domain of TMEM106B, allowing a detailed survey of the proteolytic processing under physiological conditions in cellular models and TMEM106B-related mouse models. Moreover, fibrillary TMEM106B was detected in human autopsy material. We find that the luminal domain is generated by multiple lysosomal cysteine-type proteases. Cysteine-type proteases perform additional C-terminal trimming, for which experimental evidence has been lacking. The presented results allow an in-depth perception of the processing of TMEM106B, a prerequisite to understanding factors leading to fibril formation.