Proteolysis and remodeling of the extracellular matrix occur physiologically in processes such as tissue morphogenesis and repair and may participate in the regulation of complex cell functions, including proliferation and differentiation. While matrix degradation appears to be relevant to T lymphocyte migration through tissues, little is known about whether degraded matrix affects T lymphocyte function. We have studied the interaction between T lymphocytes and tenascin-C (TN-C), a matrix protein we have previously reported to inhibit T lymphocyte activation, in the context of plasmin-induced degradation. Here we report that plasmin efficiently cleaves TN-C. Peripheral blood T lymphocytes stimulated with phorbol ester, anti-CD28, or anti-CD3 Ab, induce, within 24 to 48 h, a strong plasminogen-dependent proteolysis of TN-C. We demonstrate that stimulated T lymphocytes activate plasminogen by secreting the urokinase-type plasminogen activator (u-PA). Plasminogen activation by T lymphocyte-derived u-PA occurs efficiently in fluid phase in the absence of cells. We investigate the consequences of plasmin-induced proteolysis on three of the effects of TN-C in relation to lymphocyte functions. Plasmin proteolysis converts TN-C from a nonadhesive into an adhesive substrate for T lymphocytes and abolishes its aggregating activity on PBMC. In contrast, the inhibitory effect of TN-C on T lymphocyte activation remains unaffected. These observations demonstrate that stimulated T lymphocytes induce plasminogen-dependent proteolysis of TN-C by secreting u-PA and suggest that proteolysis of TN-C may represent a mechanism by which to regulate some of its effects on T lymphocyte functions.