The coagulation cascade is designed to sense tissue injury by physical separation of the membrane-anchored cofactor tissue factor (TF) from inactive precursors of coagulation proteases circulating in plasma. Once TF on epithelial and other extravascular cells is exposed to plasma, sequential activation of coagulation proteases coordinates hemostasis and contributes to host defense and tissue repair. Membrane-anchored serine proteases (MASPs) play critical roles in the development and homeostasis of epithelial barrier tissues; how MASPs are activated in mature epithelia is unknown. We here report that proteases of the extrinsic pathway of blood coagulation transactivate the MASP matriptase, thus connecting coagulation initiation to epithelial proteolysis and signaling. Exposure of TF-expressing cells to factors (F) VIIa and Xa triggered the conversion of latent pro-matriptase to an active protease, which in turn cleaved the pericellular substrates protease-activated receptor-2 (PAR2) and pro-urokinase. An activation pathway-selective PAR2 mutant resistant to direct cleavage by TF:FVIIa and FXa was activated by these proteases when cells co-expressed pro-matriptase, and matriptase transactivation was necessary for efficient cleavage and activation of wild-type PAR2 by physiological concentrations of TF:FVIIa and FXa. The coagulation initiation complex induced rapid and prolonged enhancement of the barrier function of epithelial monolayers that was dependent on matriptase transactivation and PAR2 signaling. These observations suggest that the coagulation cascade engages matriptase to help coordinate epithelial defense and repair programs after injury or infection, and that matriptase may contribute to TF-driven pathogenesis in cancer and inflammation.