Angiotensin-converting enzyme 2 (ACE2) is a terminal carboxypeptidase and the receptor for the SARS and NL63 coronaviruses (CoV). Loss of ACE2 function is implicated in severe acute respiratory syndrome (SARS) pathogenesis, but little is known about ACE2 biogenesis and activity in the airways. We report that ACE2 is shed from human airway epithelia, a site of SARS-CoV infection. The regulation of ACE2 release was investigated in polarized human airway epithelia. Constitutive generation of soluble ACE2 was inhibited by DPC 333, implicating a disintegrin and metalloprotease 17 (ADAM17). Phorbol ester, ionomycin, endotoxin, and IL-1beta and TNFalpha acutely induced ACE2 release, further supporting that ADAM17 and ADAM10 regulate ACE2 cleavage. Soluble ACE2 was enzymatically active and partially inhibited virus entry into target cells. We determined that the ACE2 cleavage site resides between amino acid 716 and the putative transmembrane domain starting at amino acid 741. To reveal structural determinants underlying ACE2 release, several mutant and chimeric ACE2 proteins were engineered. Neither the juxtamembrane stalk region, transmembrane domain, nor the cytosolic domain was needed for constitutive ACE2 release. Interestingly, a point mutation in the ACE2 ectodomain, L584A, markedly attenuated shedding. The resultant ACE2-L584A mutant trafficked to the cell membrane and facilitated SARS-CoV entry into target cells, suggesting that the ACE2 ectodomain regulates its release and that residue L584 might be part of a putative sheddase "recognition motif." Thus ACE2 must be cell associated to serve as a CoV receptor and soluble ACE2 might play a role in modifying inflammatory processes at the airway mucosal surface.