One of the primary points of regulation of transforming growth factor-beta (TGF-beta) activity is control of its conversion from the latent precursor to the biologically active form. We have identified thrombospondin-1 as a major physiological regulator of latent TGF-beta activation. Activation is dependent on the interaction of a specific sequence in thrombospondin-1 (K412RFK415) with the latent TGF-beta complex. Platelet thrombospon-din-1 has TGF-beta activity and immunoreactive mature TGF-beta associated with it. We now report that the latency-associated peptide (LAP) of the latent TGF-beta complex also interacts with thrombospondin-1 as part of a biologically active complex. Thrombospondin.LAP complex formation involves the activation sequence of thrombospondin-1 (KRFK) and a sequence (LSKL) near the amino terminus of LAP that is conserved in TGF-beta1-5. The interactions of LAP with thrombospondin-1 through the LSKL and KRFK sequences are important for thrombospondin-mediated activation of latent TGF-beta since LSKL peptides can competitively inhibit latent TGF-beta activation by thrombospondin or KRFK-containing peptides. In addition, the association of LAP with thrombospondin-1 may function to prevent the re-formation of an inactive LAP.TGF-beta complex since thrombospondin-bound LAP no longer confers latency on active TGF-beta. The mechanism of TGF-beta activation by thrombospondin-1 appears to be conserved among TGF-beta isoforms as latent TGF-beta2 can also be activated by thrombospondin-1 or KRFK peptides in a manner that is sensitive to inhibition by LSKL peptides.