The role of receptor-bound urokinase-type plasminogen activator (uPA) in cellular activation of latent transforming growth factor-beta (LTGF-beta) was investigated in a model system of mouse LB6 cells transfected with either a human uPA receptor cDNA (LhuPAR+), a human prouPA cDNA (LhuPA), or a control neomycin-resistance cDNA (Lneo). When LhuPAR+ cells were co-cultured with LhuPA cells, the plasmin-dependent fibrinolytic activity generated was more than that observed in either homotypic cultures with fivefold greater number of LhuPA cells or co-cultures containing LhuPA and Lneo cells instead of the LhuPAR+ cells. The preferential activation of TGF-beta by co-cultures with the greatest plasmin-generation potential, LhuPAR+ and LhuPA cells, was confirmed by three independent bioassays. In the first assay, a 48% decrease in PA activity, a measure of active TGF-beta production, was observed with BAE cells treated with conditioned medium (CM) from co-cultures of LhuPA and LhuPAR+ cells. Inclusion of neutralizing antibodies to TGF-beta abrogated the inhibitory effect of CM on PA activity demonstrating that the inhibitory molecule was TGF-beta. Addition of the amino terminal fragment of uPA (ATF) or omission of plasminogen from co-cultures blocked both the fibrinolytic activity and the generation of TGF-beta activity in the CM. In the second assay, CM from co-cultures of LhuPA and LhuPAR+ cells inhibited the migration of BAE cells in a wound assay. Controls with anti-TGF-beta IgG indicated that the inhibition was due to TGF-beta. In the third assay, proliferation of mink lung epithelial cells was inhibited by CM generated by co-cultures of LhuPA and LhuPAR+ cells as compared to CM from the same cells cultured in the absence of plasminogen or to CM from a co-culture of LhuPA with LhuPAR- cells. Excess mannose-6-phosphate (M6P) blocked the generation of TGF-beta as assayed by both the BAE migration and PA assays, presumably because it interfered with cell-surface localization of LTGF-beta. Additionally, small numbers of LhuPA and LhuPAR+ cells co-cultured with BAE cells inhibited the BAE cell PA activity via the paracrine action of TGF-beta. These results support the conclusion that plasmin-dependent activation LTGF-beta by LB6 cells is promoted by the surface localization of uPA by its receptor.