Tissue factor pathway inhibitor (TFPI) inhibits the tissue factor--factor VIIa complex and factor Xa with its first and second Kunitz domains (K1 and K2), respectively. The inhibitory activity is enhanced by heparin, and the C-terminal basic part has been shown to be a heparin-binding site (HBS-1). To characterize and localize a second heparin-binding site (HBS-2), we studied the effect of heparin on the inhibitory activity of two forms of recombinant human TFPI, the full-length TFPI (rTFPI), and TFPI lacking the C-terminal basic part (rTFPI-C), by assaying the inhibition of human factor Xa. rTFPI-C inhibited factor Xa with an initial Ki of 6.79 nM in the absence of Ca2+ and 22.3 nM in the presence of 5 mM CaCl2. Heparin decreased the initial Ki to 1.79 nM in the absence of Ca2+ and 2.68 nM in the presence of 5 mM CaCl2, indicating the presence of HBS-2 in rTFPI-C. The dissociation constant for the binding of HBS-2 with heparin was determined to be 830 nM using fluorescein-labeled heparin and rTFPI-C. Heparin enhanced the inhibitory activity of a fragment consisting of the K2 and K3 domains, but it did not stimulate the inhibitory activity of the K2 domain. A synthetic peptide mimicking from Gly212 to Phe243 in the K3 domain reduced the effect of heparin on the inhibition by rTFPI-C and rTFPI. These results defined the location of HBS-2 in the basic region of the K3 domain between Gly212 and Phe243.