Hepsin, a type II transmembrane serine protease, is highly upregulated in prostate cancer and promotes tumor progression and metastasis. We generated a soluble form of hepsin comprising the entire extracellular domain to show that it efficiently converts single-chain hepatocyte growth factor (pro-HGF) into biologically active two-chain HGF. Hepsin activity was potently inhibited by soluble forms of the bi-Kunitz domain inhibitors HAI-1B (IC(50) 21.1+/-2.7 nM) and HAI-2 (IC(50) 1.3+/-0.3 nM). Enzymatic assays with HAI-1B Kunitz domain mutants (R260A and K401A) further demonstrated that inhibition was due to Kunitz domain-1. The results suggest a functional link between hepsin and the HGF/Met pathway, which may contribute to tumor progression.