Tight control of T-cell proliferation and effector function is essential to ensure an effective but appropriate immune response. Here, we reveal that this is controlled by the metalloprotease-mediated cleavage of LAG-3, a negative regulatory protein expressed by all activated T cells. We show that LAG-3 cleavage is mediated by two transmembrane metalloproteases, ADAM10 and ADAM17, with the activity of both modulated by two distinct T-cell receptor (TCR) signaling-dependent mechanisms. ADAM10 mediates constitutive LAG-3 cleavage but increases approximately 12-fold following T-cell activation, whereas LAG-3 shedding by ADAM17 is induced by TCR signaling in a PKCtheta-dependent manner. LAG-3 must be cleaved from the cell surface to allow for normal T-cell activation as noncleavable LAG-3 mutants prevented proliferation and cytokine production. Lastly, ADAM10 knockdown reduced wild-type but not LAG-3(-/-) T-cell proliferation. These data demonstrate that LAG-3 must be cleaved to allow efficient T-cell proliferation and cytokine production and establish a novel paradigm in which T-cell expansion and function are regulated by metalloprotease cleavage with LAG-3 as its sole molecular target.