One feature that distinguishes all of the inhibitory members of the serpin gene family is the presence of a small uncharged residue at the P14 position of the reactive center loop. In this report we examine the effects of mutations at this position, in the serpin, plasminogen activator inhibitor type 1 (PAI-1). Replacement of the native P14 Thr-333 residue by an Arg (Thr-333-->Arg) resulted in complete loss of inhibitory activity toward tissue-type plasminogen activator and urokinase-type plasminogen activator. Comparison of the binding of the mutant inhibitor and wild type PAI-1 (WTPAI-1) to anhydrotrypsin indicated that the initial interaction of the two inhibitors with proteases was identical. However, whereas WTPAI-1 forms SDS-stable complexes with both plasminogen activators, the mutant PAI-1 was efficiently cleaved as a substrate. Amino-terminal sequence analysis indicated that cleavage of the mutant PAI-1 occurred at its reactive center P1-P1' Arg-Met bond. Thermal denaturation studies of native and cleaved PAIs indicated that native Thr-333-->Arg mutant had a thermal stability identical to active WTPAI-1 and that both proteins became significantly more stable following cleavage by elastase (cleaved at the P4-P3 bond). Finally, the function of recombinant PAI-1 variants containing 15 of the possible 19 amino acid substitutions at P14 were analyzed. While residue size appeared to have little effect on inhibitory activity, the presence of either a positive or a negative charge at P14, converted PAI-1 to a substrate. Taken together, these results suggest that while insertion of the reactive center loop is not essential for protease binding, it is a necessary second step required for inhibitor function. The presence of a charged residue at P14 can retard this insertion, resulting in conversion of the serpin to a substrate.