Matriptase, a membrane-associated serine protease, plays an essential role in epidermal barrier function through activation of the glycosylphosphatidylinositol (GPI)-anchored serine protease prostasin. The matriptase-prostasin proteolytic cascade is tightly regulated by hepatocyte growth factor activator inhibitor (HAI)-1 such that matriptase autoactivation and prostasin activation occur simultaneously and are followed immediately by the inhibition of both enzymes by HAI-1. However, the mechanisms whereby matriptase acts on extracellular substrates remain elusive. Here we report that some active matriptase can escape HAI-1 inhibition by being rapidly shed from the cell surface. In the pericellular environment, shed active matriptase is able to activate hepatocyte growth factor (HGF), accelerate plasminogen activation, and shed syndecan 1. The amount of active matriptase shed is inversely correlated with the amount of antithrombin (AT) bound to the surface of the keratinocytes. Binding of AT to the surface of keratinocytes is dependent on a functional heparin binding site, Lys-125, and that the N-glycosylation site Asn-135 be unglycosylated. This suggests that β-AT, and not α-AT, is responsible for regulation of pericellular matriptase activity in keratinocytes. Keratinocytes appear to rely on AT to regulate the level of pericellular active matriptase much more than breast and prostate epithelial cells in which AT regulation of matriptase activity occurs at much lower levels than keratinocytes. These results suggest that keratinocytes employ two distinct serine protease inhibitors to control the activation and processing of two different sets of matriptase substrates leading to different biological events: 1) HAI-1 for prostasin activation/inhibition, and 2) AT for the pericellular proteolysis involved in HGF activation, accelerating plasminogen activation, and shedding of syndecans.