CD26/dipeptidylpeptidase IV (DPPIV) is a membrane-bound extracellular peptidase that cleaves dipeptides from the N terminus of polypeptide chains. The N terminus of chemokines is known to interact with the extracellular portion of chemokine receptors, and removal of these amino acids in many instances results in significant changes in functional activity. CD26/DPPIV has the ability to cleave the chemokine CXCL12/stromal cell-derived factor 1alpha (SDF-1alpha) at its position two proline. CXCL12/SDF-1alpha induces migration of hemopoietic stem and progenitor cells, and it is thought that CXCL12 plays a crucial role in homing/mobilization of these cells to/from the bone marrow. We found that CD26/DPPIV is expressed by a subpopulation of CD34(+) hemopoietic cells isolated from cord blood and that these cells have DPPIV activity. The involvement of CD26/DPPIV in CD34(+) hemopoietic stem and progenitor cell migration has not been previously examined. Functional studies show that the N-terminal-truncated CXCL12/SDF-1alpha lacks the ability to induce the migration of CD34(+) cord blood cells and acts to inhibit normal CXCL12/SDF-1alpha-induced migration. Finally, inhibiting the endogenous CD26/DPPIV activity on CD34(+) cells enhances the migratory response of these cells to CXCL12/SDF-1alpha. This process of CXCL12/SDF-1alpha cleavage by CD26/DPPIV on a subpopulation of CD34(+) cells may represent a novel regulatory mechanism in hemopoietic stem and progenitor cells for the migration, homing, and mobilization of these cells. Inhibition of the CD26/DPPIV peptidase activity may therefore represent an innovative approach to increasing homing and engraftment during cord blood transplantation.