Many growth factors and cytokines are immobilized on the extracellular matrix (ECM) by binding to glycosaminoglycans and are stored in an inactive form in the cellular microenvironment. However, the mechanisms of ECM-bound growth factor or cytokine activation have not been well documented. We showed that the insulin-like growth factor type-1 receptor (IGF-1R) was rapidly phosphorylated after the addition of matrix metalloproteinase (MMP)-7 to a serum-starved human colon cancer cell line (HT29) and that phosphorylation was completely inhibited by an IGF-II neutralizing antibody. In the ECM of this cell line, IGF-II and IGF binding protein (BP)-2 coexisted, but IGFBP-2 disappeared from the ECM fraction after treatment with MMP-7 or heparinase III. On the other hand, in a cell line in which IGF-1R was overexpressed, IGF-1R was phosphorylated by supernatant from the MMP-7-treated ECM fraction of HT29 but not by that from a heparinase-III-treated ECM fraction. We also demonstrated that MMP-7 degrades IGFBP-2 in vitro at three cleavage sites (peptide bonds E(151)-L(152), G(175)-L(176) and K(181)-L(182)), which have not been documented previously. Taken together, these results demonstrate that MMP-7 generates bioactive IGF-II by degrading the IGF-II/IGFBP-2 complex binding to heparan sulfate proteoglycan in the ECM, resulting in IGF-II-induced signal transduction. This evidence indicates that some ECM-associated growth factors enhance their ability to bind to their receptors by some proteases in the tumor microenvironment. This mechanism of action ('protease-triggered matricrine') represents an attractive model for understanding ECM-tumor interactions.