We have uncovered a novel functional relationship between the hyaluronan receptor CD44, the matrix metalloproteinase-9 (MMP-9) and the multifunctional cytokine TGF-beta in the control of tumor-associated tissue remodeling. CD44 provides a cell surface docking receptor for proteolytically active MMP-9 and we show here that localization of MMP-9 to cell surface is required for its ability to promote tumor invasion and angiogenesis. Our observations also indicate that MMP-9, as well as MMP-2, proteolytically cleaves latent TGF-beta, providing a novel and potentially important mechanism for TGF-beta activation. In addition, we show that MMP-9 localization to the surface of normal keratinocytes is CD44 dependent and can activate latent TGF-beta. These observations suggest that coordinated CD44, MMP-9, and TGF-beta function may provide a physiological mechanism of tissue remodeling that can be adopted by malignant cells to promote tumor growth and invasion.