The transglutaminase 1 (TGase 1) enzyme is required for the formation of a cornified cell envelope in epidermal keratinocytes. We show here that in addition to its membrane-anchored form, soluble forms of it are also important in keratinocytes. Proliferating cells contain soluble full-length enzyme of 106 kDa, but terminally differentiating cells contain a soluble 67-kDa form often complexed with a 33-kDa protein as well. The amino terminus of the 67 kDa form is residue 93 of the TGase 1 protein, corresponding to the site of proteolytic activation of the factor XIIIa TGase. The amino terminus of the 33-kDa protein is residue 573, corresponding to the site of a second proteolytic cleavage site of factor XIIIa, and of the site for proteolytic activation of the TGase 3 enzyme. The specific activity of the 67/33-kDa soluble complex is twice that of the soluble 67-kDa form and 10 times that of full-length TGase 1. The half-lives of the 67/33- and 106-kDa forms are about 7 or 20 h, respectively. Thus the TGase 1 enzyme is complex, since it exists in keratinocytes as multiple soluble forms, either intact or proteolytically processed at conserved sites, and which have varying specific activities and likely functions.