Many eukaryotic receptors and enzymes rely on glycosylphosphatidylinositol (GPI) anchors for membrane localization and function. The transmembrane complex GPI-T recognizes diverse proproteins at a signal peptide region that lacks consensus sequence and replaces it with GPI via a transamidation reaction. How GPI-T maintains broad specificity while preventing unintentional cleavage is unclear. Here, substrates- and products-bound human GPI-T structures identify subsite features that enable broad proprotein specificity, inform catalytic mechanism, and reveal a multilevel safeguard mechanism against its promiscuity. In the absence of proproteins, the catalytic site is invaded by a locally stabilized loop. Activation requires energetically unfavorable rearrangements that transform the autoinhibitory loop into crucial catalytic cleft elements. Enzyme-proprotein binding in the transmembrane and luminal domains respectively powers the conformational rearrangement and induces a competent cleft. GPI-T thus integrates various weak specificity regions to form strong selectivity and prevent accidental activation. These findings provide important mechanistic insights into GPI-anchored protein biogenesis.