The 33-kDa matrix protein BM-40 (SPARC, osteonectin) consists of an acidic N-terminal domain I, a central cysteine-rich follistatin-like module, and a C-terminal extracellular calcium-binding (EC) module. Previous studies attributed collagen IV and high affinity calcium binding of BM-40 to its EC module, which was shown by x-ray crystallography to consist of an EF-hand pair surrounded by several alpha-helical and loop segments. This module was now shown by surface plasmon resonance assay to bind with similar affinities to collagens I, III, and V. Cleavage of recombinant BM-40 and its EC module by collagenase-3, gelatinases A and B, matrilysin, and stromelysin-1 showed similar fragment patterns, whereas collagenase-1 was inactive. Some differences were, however, observed in cleavage rates and the preference of certain cleavage sites. Edman degradation of fragments demonstrated only three to four major cleavage sites in the central region of domain I and a single uniform cleavage in helix C of the EC module. Cleavage is accompanied by a 7-20-fold increase in binding activity for collagens I, IV, and V but revealed only small effects on calcium-dependent alpha-helical changes in the EC module. The data were interpreted to indicate that helix C cleavage is mainly responsible for enhancing collagen affinity by exposing the underlying helix A of the EC module. A similar activation may also occur in situ as indicated previously for tissue-derived BM-40.