CD44 was once thought to simply be a transmembrane adhesion molecule that also played a role in the metabolism of its principal ligand hyaluronan. Investigations of CD44 over the past approximately 20 yr have established additional functions for CD44, including its capacity to mediate inflammatory cell function and tumor growth and metastasis. It has also become evident that intricate posttranslational modifications of CD44 regulate the affinity of the receptor for its ligands. In this review, we focus on emerging evidence that functional fragments of the cytoplasmic and ectodomain of CD44 can be liberated by enzymatic modification of cell surfaces as well as of cell-associated matrix. Based on the evidence discussed, we propose that CD44 exists in three phases, as a transmembrane receptor, as an integral component of the matrix, and as a soluble protein found in body fluids, each with biologically significant functions of which some are shared and some distinct. Thus, CD44 represents a model for understanding posttranslational processing and its emerging role as a general mechanism for regulating cell behavior.