Signal peptide peptidase (SPP) and the four homologous SPP-like (SPPL) proteases constitute a family of intramembrane aspartyl proteases with selectivity for type II-oriented transmembrane segments. Here, we analyse the physiological function of the orphan protease SPPL2c, previously considered to represent a non-expressed pseudogene. We demonstrate proteolytic activity of SPPL2c towards selected tail-anchored proteins. Despite shared ER localisation, SPPL2c and SPP exhibit distinct, though partially overlapping substrate spectra and inhibitory profiles, and are organised in different high molecular weight complexes. Interestingly, SPPL2c is specifically expressed in murine and human testis where it is primarily localised in spermatids. In mice, SPPL2c deficiency leads to a partial loss of elongated spermatids and reduced motility of mature spermatozoa, but preserved fertility. However, matings of male and female SPPL2c-/- mice exhibit reduced litter sizes. Using proteomics we identify the sarco/endoplasmic reticulum Ca2+-ATPase (SERCA2)-regulating protein phospholamban (PLN) as a physiological SPPL2c substrate. Accumulation of PLN correlates with a decrease in intracellular Ca2+ levels in elongated spermatids that likely contribute to the compromised male germ cell differentiation and function of SPPL2c-/- mice.