During pregnancy, insulin-like growth factors (IGFs) are important for growth of fetal and maternal tissues. One of the IGF binding proteins, IGFBP-1, is thought to regulate their activity within the local environment of the placenta. IGFBP-1 usually exists as a phosphorylated, high affinity species, which sequesters IGFs, thereby inhibiting their actions. This study has investigated the mechanisms that release IGF from IGFBP-1 at the maternal-fetal interface. Under basal conditions, human decidualized endometrium produces both non-phosphorylated (np) and phosphorylated (p) isoforms of IGFBP-1; however, in the presence of IGF-II, which is a trophoblast secretory product, npIGFBP-1 was preferentially produced. Furthermore, we found that trophoblast, presumably via placental alkaline phosphatase, can de-phosphorylate pIGFBP-1. Since npIGFBP-1 has decreased affinity for IGF-I, these effects should enhance IGF-I bioavailability. In addition, we found that decidual cells produce a protease, which cleaves IGFBP-1, but only when it is non-phosphorylated; [(125)I]-npIGFBP-1 is proteolysed into 14 and 17 kDa fragments which have markedly reduced affinity for IGF. We therefore propose paracrine modulation of IGFBP-1 at the maternal-fetal interface involving a multi-step process of de-phosphorylation and proteolysis; this will result in enhanced IGF bioavailability and is likely to represent an important mechanism for controlling fetal and maternal tissue growth.