Matrix metalloproteases from the cell surface cleave an 80 kDa E-cadherin fragment (sE-CAD) that induces invasion of cancer cells into collagen type I and inhibits cellular aggregation. Conditioned media from MDCKts.srcCl2 cells at 40 degrees C and 35 degrees C, PCm.src5 and COLO-16 cells at 37 degrees C contained spontaneously released sE-CAD; these 48 h old conditioned media were capable of inhibiting E-cadherin functions in a paracrine way. Here we show direct cleavage of the extracellular domain of E-cadherin by the serine protease plasmin. sE-CAD released by plasmin inhibits E-cadherin functions as evidenced by induction of invasion into collagen type I and inhibition of cellular aggregation. This functional inhibition by sE-CAD was reversed by aprotinin or by immunoadsorption on protein Sepharose 4 fast flow beads with antibodies against the extracellular part of E-cadherin. Our results demonstrate that plasmin produces extracellular E-cadherin fragments which regulate E-cadherin function in cells containing an intact E-cadherin/catenin complex.