Prostasin is expressed at the apical surface of normal epithelial cells and suppresses in vitro invasion of cancer cells. Prostasin re-expression in the PC-3 prostate carcinoma cells down-regulated the epidermal growth factor receptor (EGFR) protein expression and EGF-induced phosphorylation of the extracellular signal-regulated kinases (Erk1/2). We report here that prostasin and its activating enzyme matriptase are capable of inducing proteolytic cleavages in the EGFR extracellular domain (ECD) when co-expressed in the FT-293 cells, generating two amino-terminally truncated fragments EGFR135 and EGFR110, at 135 and 110 kDa. Prostasin's role in EGFR cleavage is dependent on the serine active-site but not the GPI-anchor. The modifications of EGFR were confirmed to be on the primary structure by deglycosylation. EGFR135 and EGFR110 are not responsive to EGF stimulation, indicating loss of the ligand-binding domains. EGFR110 is constitutively phosphorylated and in its presence Erk1/2 phosphorylation is increased in the absence of EGF. The protease-induced EGFR cleavages are not dependent on EGFR phosphorylation. The EGFR ECD proteolytic modification by matriptase-prostasin is also observed in the BEAS-2B normal lung epithelial cells, the BPH-1 benign prostate hyperplasia and the MDA-MB-231 breast cancer cell lines; and represents a novel mechanism for epithelial cells to modulate EGF-EGFR signaling.