Edited by F. Peter Guengerich Matriptase-2 (MT2) is a type-II transmembrane, trypsin-like serine protease that is predominantly expressed in the liver. It is a key suppressor for the expression of hepatic hepcidin, an ironregulatory hormone that is induced via the bone morphogenetic protein signaling pathway. A current model predicts that MT2 suppresses hepcidin expression by cleaving multiple components of the induction pathway. MT2 is synthesized as a zymogen that undergoes autocleavage for activation and shedding. However, the biologically active form of MT2 and, importantly, the contributions of different MT2 domains to its function are largely unknown. Here we examined the activities of truncated MT2 that were generated by site-directed mutagenesis or Gibson assembly master mix, and found that the stem region of MT2 determines the specificity and efficacy for substrate cleavage. The transmembrane domain allowed MT2 activation after reaching the plasma membrane, and the cytoplasmic domain facilitated these processes. Further in vivo rescue studies indicated that the entire extracellular and transmembrane domains of MT2 are required to correct the low-hemoglobin, low-serum iron, and high-hepcidin status in MT2 ؊/؊ mice. Unlike in cell lines, no autocleavage of MT2 was detected in vivo in the liver, implying that MT2 may also function independently of its proteolytic activity. In conjunction with our previous studies implicating the cytoplasmic domain as an intracellular iron sensor, these observations reveal the importance of each MT2 domain for MT2-mediated substrate cleavage and for its biological function.