Tumor necrosis factor (TNF)-related activation-induced cytokine (TRANCE), a member of the TNF family, is a dendritic cell survival factor and is essential for osteoclastogenesis and osteoclast activation. In this report we demonstrate (i) that TRANCE, like TNF-alpha, is made as a membrane-anchored precursor, which is released from the plasma membrane by a metalloprotease; (ii) that soluble TRANCE has potent dendritic cell survival and osteoclastogenic activity; (iii) that the metalloprotease-disintegrin TNF-alpha convertase (TACE) can cleave immunoprecipitated TRANCE in vitro in a fashion that mimics the cleavage observed in tissue culture cells; and (iv) that in vitro cleavage of a TRANCE ectodomain/CD8 fusion protein and of a peptide corresponding to the TRANCE cleavage site by TACE occurs at the same site that is used when TRANCE is shed from cells into the supernatant. We propose that the TRANCE ectodomain is released from cells by TACE or a related metalloprotease-disintegrin, and that this release is an important component of the function of TRANCE in bone and immune homeostasis.