SHPS-1 is a transmembrane protein whose cytoplasmic region undergoes tyrosine phosphorylation and then binds the protein-tyrosine phosphatase SHP-2. Formation of the SHPS-1-SHP-2 complex is implicated in regulation of cell migration. In addition, SHPS-1 and its ligand CD47 constitute an intercellular recognition system that contributes to inhibition of cell migration by cell-cell contact. The ectodomain of SHPS-1 has now been shown to be shed from cells in a reaction likely mediated by a metalloproteinase. This process was promoted by activation of protein kinase C or of Ras, and the released ectodomain exhibited minimal CD47-binding activity. Metalloproteinases catalyzed the cleavage of a recombinant SHPS-1-Fc fusion protein in vitro, and the primary cleavage site was localized to the juxtamembrane region of SHPS-1. Forced expression of an SHPS-1 mutant resistant to ectodomain shedding impaired cell migration, cell spreading, and reorganization of the actin cytoskeleton. It also increased the tyrosine phosphorylation of paxillin and FAK triggered by cell adhesion. These results suggest that shedding of the ectodomain of SHPS-1 plays an important role in regulation of cell migration and spreading by this protein.The extracellular region of various transmembrane proteins is cleaved by proteases, such as metalloproteinases, and released as a soluble protein fragment (1, 2). This process, known as "ectodomain shedding," often influences the mode of action or biological activity of the affected protein. For instance, ectodomain shedding of heparin-binding epidermal growth factor (EGF) 1 -like growth factor (HB-EGF), a membrane-anchored EGF-related protein (3), results in its activation, in that the released fragment binds to EGF receptors and thereby stimulates cell proliferation (3, 4). In contrast, the membraneanchored forms of c-kit ligand (5) and of ephrins, the latter of which are ligands of Eph receptor tyrosine kinases (6), are fully functional, whereas their soluble forms generated by ectodomain shedding exhibit little or no biological activity. Ectodomain shedding is thus an important regulator of the function of certain membrane proteins that contribute to cellcell communication.SHPS-1 (SHP substrate-1) (7), also known as SIRP␣ (8), BIT (9), and p84 neural adhesion molecule (10), is a receptor-like transmembrane protein that is particularly abundant in neurons and macrophages (10, 11), although other cell types, such as fibroblasts, also express this protein (7). The putative extracellular region of SHPS-1 comprises three immunoglobulin (Ig)-like domains with multiple N-linked glycosylation sites, whereas the cytoplasmic region of the protein contains four YXX(L/V/I) motifs, which are putative tyrosine phosphorylation sites and binding sites for the Src homology 2 (SH2) domains of the protein-tyrosine phosphatases SHP-2 and SHP-1 (7, 8). Tyrosine phosphorylation of SHPS-1 is regulated by various growth factors, including insulin and EGF, as well as by cell adhesion to extracellular matrix proteins (12). SH...