As a source of transforming growth factor beta1 (TGF-beta1), mast cells have been implicated as potential effector cells in many pathological processes. However, the mechanisms by which mast cells express, secrete, and activate TGF-beta1 have remained vague. We show here by means of RT-PCR, immunoblotting, and immunocytochemistry that isolated rat peritoneal mast cells synthesize and store large latent TGF-beta1 in their chymase 1-containing secretory granules. Mast cell stimulation and degranulation results in rapid secretion of the latent TGF-beta1, which is converted by chymase 1 into an active form recognized by the type II TGF-beta serine/threonine kinase receptor (TbetaRII). Thus, mast cells secrete active TGF-beta1 by a unique secretory mechanism in which latent TGF-beta1 and the activating enzyme chymase 1 are coreleased. The activation of latent TGF-beta1 specifically by chymase was verified using recombinant human latent TGF-beta1 and recombinant human chymase. In isolated TbetaRI- and TbetaRII-expressing peritoneal macrophages, the activated TGF-beta1 induces the expression of the plasminogen activator inhibitor 1 (PAI-1), whereas in the mast cells, the levels of TbetaRI, TbetaRII, and PAI-1 expression were below detection. Selective stimulation of mast cells in vivo in the rat peritoneal cavity leads to rapid overexpression of TGF-beta1 in peritoneal mast cells and of TbetaRs in peritoneal macrophages. These data strongly suggest that mast cells can act as potent paracrine effector cells both by secreting active TGF-beta1 and by enhancing its response in target cells.