Prior evidence indicates that bile acids stimulate colon cancer cell proliferation by muscarinic receptor-induced transactivation of epidermal growth factor receptors (EGFR). To explore further the mechanism underlying this action, we tested the hypothesis that bile acids activate a matrix metalloproteinase (MMP) that catalyzes release of an EGFR ligand. Initial studies showed that non-selective MMP inhibitors blocked the actions of deoxycholyltaurine (DCT), thereby indicating a role for MMP-catalyzed release of an EGFR ligand. DCT-induced cell proliferation was reduced by increasing concentrations of EGFR kinase inhibitors, by antibodies to the ligand binding domain of EGFR, by neutralizing antibodies to heparin binding-EGF-like growth factor (HB-EGF) and by CRM197, an inhibitor of HB-EGF release. These findings and our observations with more selective MMP inhibitors suggested that MMP-7, an enzyme known to release HB-EGF, plays a key role in mediating bile acid-induced H508 colon cancer cell proliferation. We observed that recombinant HB-EGF and MMP-7 mimicked both the signaling and proliferative actions of bile acids. Strikingly, reducing MMP-7 expression with either neutralizing antibody or small interfering RNA attenuated the actions of DCT. MMP-7 expression in H508 cells was confirmed using quantitative reverse transcription PCR. DCT stimulated a greater than 10-fold increase in MMP-7 gene transcription. Co-localization of pro-MMP-7 and pro-HB-EGF at the cell surface (immunofluorescence microscopy) was demonstrated, indicating proximity of the enzyme to its substrate. These findings provide strong evidence that in H508 human colon cancer cells, DCT-induced transactivation of EGFR is mediated by MMP-7-catalyzed release of the EGFR ligand HB-EGF.