Tissue-factor-pathway inhibitor (TFPI) is a multivalent inhibitor with three tandemly arranged Kunitz- type-protease-inhibitor (KPI) domains. Previous studies [Girard, Y. J., Warren, L. A., Novotny , W. F., Likert, K. M., Brown, S. G., Miletich, J. R & Broze, G. J. (1989) Nature 338, 518-520] by means of site-directed mutagenesis indicated that KPI domain 1 interacts with factor VIIa, that KPI domain 2 interacts with factor Xa, and that KPI domain 3 is apparently without inhibitory function. To elucidate the reaction mechanism of this complex inhibitor, we followed a different approach and studied the inhibitory properties of fragments of TFPI obtained by expression in yeast. Results obtained with TFPI-(1-161)-peptide and separate recombinant TFPI-KPI domains 1, 2 and 3 showed that KPI domain 1 inhibited factor VIIa/tissue factor (Ki = 250 nM), KPI domain 2 inhibited factor Xa (Ki = 90 nM), and that KPI domain 3 was without detectable inhibitory function. Studies with separate KPI domains also showed that KPI domain 2 was mainly responsible for inhibition of trypsin (Ki = 0.1 nM) and chymotrypsin (Ki = 0.75 nM), whereas KPI domain 1 inhibited plasmin (Ki = 26 nM) and cathepsin G (Ki = 200 nM). The structural basis for the interaction between serine proteases and KPI domains is discussed in terms of putative three-dimensional models of the proteins derived by comparative molecular-modelling methods. Studies of factor Xa inhibition by intact TFPI (Ki approximately 0.02 nM) suggested that regions other than the contact area of the KPI domain, interacted strongly with factor Xa. Secondary-site interactions were crucial for TFPI inhibition of factor Xa but was of little or no importance for its inhibition of trypsin.