Although many glycosylphosphatidylinositol (GPI)-anchored proteins have been observed as soluble forms, the mechanisms by which they are released from the cell surface have not been demonstrated. We show here that a cell-associated GPI-specific phospholipase D (GPI-PLD) releases the GPI-anchored, complement regulatory protein decay-accelerating factor (DAF) from HeLa cells, as well as the basic fibroblast growth factor-binding heparan sulfate proteoglycan from bone marrow stromal cells. DAF found in the HeLa cell culture supernatants contained both [3H]ethanolamine and [3H]inositol, but not [3H]palmitic acid, whereas the soluble heparan sulfate proteoglycan present in bone marrow stromal cell culture supernatants contained [3H]ethanolamine. 125I-labeled GPI-DAF incorporated into the plasma membranes of these two cell types was released in a soluble form lacking the fatty acid GPI-anchor component. GPI-PLD activity was detected in lysates of both HeLa and bone marrow stromal cells. Treatment of HeLa cells with 1,10-phenanthroline, an inhibitor of GPI-PLD, reduced the release of [3H]ethanolamine-DAF by 70%. The hydrolysis of these GPI-anchored molecules is likely to be mediated by an endogenous GPI-PLD because [3H]ethanolamine DAF is constitutively released from HeLa cells maintained in serum-free medium. Furthermore, using PCR, a GPI-PLD mRNA has been identified in cDNA libraries prepared from both cell types. These studies are the first demonstration of the physiologically relevant release of GPI-anchored proteins from cells by a GPI-PLD.