The Fc receptor CD16 is present on essentially all CD56(dim) peripheral blood natural killer (NK) cells. Upon recognition of antibody-coated cells it delivers a potent signal to NK cells, which eliminate targets through direct killing and cytokine production. Here we investigated the regulation of CD16 surface expression after NK cell activation. Cytokine activation and target cell stimulation led to marked decreases in CD16 expression. Activation of CD56(dim) NK cells by cross-linking CD16 with antibodies resulted in a loss of CD16 and CD62L, which correlated with increased interferon-γ production. A disintegrin and metalloprotease-17 (ADAM17) is shown to be expressed by NK cells, and its selective inhibition abrogated CD16 and CD62L shedding, and led to enhanced interferon-γ production, especially when triggering was delivered through CD16. Fc-induced production of cytokines by NK cells exposed to rituximab-coated B cell targets was also enhanced by ADAM17 inhibition. This supports an important role for targeting ADAM17 to prevent CD16 shedding and improve the efficacy of therapeutic antibodies. Our findings demonstrate that over-activation of ADAM17 in NK cells may be detrimental to their effector functions by down-regulating surface expression of CD16 and CD62L.