Thrombin and activated protein C (APC) signaling can mediate opposite biologic responses in endothelial cells. Given that thrombin induces procoagulant tissue factor (TF), we examined how TF activity is affected by APC. Exogenous or endogenously generated APC led to increased TF-dependent factor Xa activity. Induction required APC's proteolytic activity and binding to endothelial cell protein C receptor but not protease activated receptors. APC did not affect total TF antigen expression or the availability of anionic phospholipids on the apical cell membrane. Western blotting and cell surface immunoassays demonstrated that APC sheds the Kunitz 1 domain from tissue factor pathway inhibitor (TFPI). A TFPI Lys86Ala mutation between the Kunitz 1 and 2 domains eliminated both cleavage and the enhanced TF activity in response to APC in overexpression studies, indicating that APC up-regulates TF activity by endothelial cell protein C receptor-dependent shedding of the Kunitz 1 domain from membrane-associated TFPI. Our results demonstrate an unexpected procoagulant role of the protein C pathway that may have important implications for the regulation of TF- and TFPI-dependent biologic responses and for fine tuning of the hemostatic balance in the vascular system.