Tissue-type plasminogen activator (t-PA) has evolved to optimize cleavage of plasminogen (Plg) while minimizing cleavage of other potential protein and peptide substrates. We find that the S2 and S2 subsites of t-PA are important determinants of specificity, and occupancy of the S3 subsite is essential for catalysis. t-PA efficiently hydrolyzes a protein substrate which incorporates an optimized substrate sequence, revealing the ability of the protease to participate in the highly selective cleavage of protein fusions. Surprisingly, t-PA cleaves this engineered protein substrate with a Km that is reduced 950-fold relative to the Km for hydrolysis of the same target sequence within a peptide. This reduction of Km suggests that binding is facilitated by interactions between protein substrate and protease that are distant from the P4-P2' residues. We use this kinetic data to derive a model in which several distinct mechanisms contribute to the remarkable specificity of t-PA.