Proteolytic shedding is an important step in the functional down-regulation and turnover of most membrane proteins at the cell surface. Extracellular matrix metalloproteinase inducer (EMMPRIN) is a multifunctional glycoprotein that has two Ig-like domains in its extracellular portion and functions in cell adhesion as an inducer of matrix metalloproteinase (MMP) expression in surrounding cells. Although the shedding of EMMPRIN is reportedly because of cleavage by metalloproteinases, the responsible proteases, cleavage sites, and stimulants are not yet known. In this study, we found that human tumor HT1080 and A431 cells shed a 22-kDa EMMPRIN fragment into the culture medium. The shedding was enhanced by phorbol 12-myristate 13-acetate and inhibited by TIMP-2 but not by TIMP-1, suggesting the involvement of membrane-type MMPs (MT-MMPs). Indeed, down-regulation of the MT1-MMP expression in A431 cells using small interfering RNA inhibited the shedding. The 22-kDa fragment was purified, and the C-terminal amino acid was determined. A synthetic peptide spanning the cutting site was cleaved by MT1-MMP in vitro. The cleavage site is located in the linker region connecting the two Ig-like domains. The N-terminal Ig-like domain is important for the MMP inducing activity of EMMPRIN and for cell-cell interactions, presumably through its ability to engage in homophilic interactions, and the 22-kDa fragment retained the ability to augment MMP-2 expression in human fibroblasts. Thus, the MT1-MMP-dependent cleavage eliminates the functional N-terminal domain of EMMPRIN from the cell surface, which is expected to down-regulate its function. At the same time, the released 22-kDa fragment may mediate the expression of MMPs in tumor tissues.