Mutations in a recently identified gene HJV (also called HFE2, or repulsive guidance molecule C, RgmC) are the major cause of juvenile hemochromatosis (JH). The protein product of HJV, hemojuvelin, contains a C-terminal glycosylphosphatidylinositol anchor, suggesting that it can be present in either a soluble or a cell-associated form. Patients with HJV hemochromatosis have low urinary levels of hepcidin, the principal iron-regulatory hormone secreted by the liver. However, neither the specific role of hemojuvelin in maintaining iron homeostasis nor its relationship to hepcidin has been experimentally established. In this study we used hemojuvelin-specific siRNAs to vary hemojuvelin mRNA concentration and showed that cellular hemojuvelin positively regulated hepcidin mRNA expression, independently of the interleukin 6 pathway. We also showed that recombinant soluble hemojuvelin (rs-hemojuvelin) suppressed hepcidin mRNA expression in primary human hepatocytes in a log-linear dose-dependent manner, suggesting binding competition between soluble and cell-associated hemojuvelin. Soluble hemojuvelin was found in human sera at concentrations similar to those required to suppress hepcidin mRNA in vitro. In cells engineered to express hemojuvelin, soluble hemojuvelin release was progressively inhibited by increasing iron concentrations. We propose that soluble and cell-associated hemojuvelin reciprocally regulate hepcidin expression in response to changes in extracellular iron concentration.