CD44 is a cell surface receptor for hyaluronate, a component of the extracellular matrix (ECM). Although CD44 has been implicated in tumor invasion and metastasis, the molecular mechanisms remain to be elucidated. Here we find that CD44 expressed in cancer cells is cleaved at the membrane-proximal region of the ectodomain and the membrane-bound cleavage product can be detected using an antibody against the cytoplasmic domain of CD44. Furthermore, we report that CD44 cleavage is mediated by a membrane-associated metalloprotease expressed in cancer cells. A tissue inhibitor of metalloproteases-1 (TIMP-1), as well as metalloprotease inhibitors, inhibit CD44 cleavage in the cell-free assay. Contrary, serine protease inhibitors enhance CD44 cleavage, and the enhancement can be prevented by pretreatment with a metalloprotease inhibitor. Thus, CD44 cleavage is regulated by an intricate balance between some proteases and their inhibitors. Interestingly, treatment with the metalloprotease blocker 1,10-phenanthroline, which strongly prevent the CD44 cleavage, suppressed RERF-LC-OK lung cancer cell migration on a hyaluronate substrate, but not on several other substrates. These results suggest that CD44 cleavage plays a critical role in an efficient cell-detachment from a hyaluronate substrate during the cell migration and consequently promotes CD44-mediated cancer cell migration. Our present data indicate that CD44, not only ECM per se, is one of the targets of pericellular proteolysis involved in tumor invasion and metastasis.