Limited proteolysis of insulin-like growth factor binding protein-3 (IGFBP-3) is increasingly becoming recognized as an essential mechanism in the regulation of insulin-like growth factor (IGF) bioavailability, both in the bloodstream and at cellular level. Plasmin generated on contact with various cell types provokes proteolytic cleavages that are similar to those induced in vivo by (as yet unidentified) IGFBP-3 proteases. Experimental conditions were determined to achieve plasmin-induced limited proteolysis of recombinant human nonglycosylated IGFBP-3. Two major fragments of 22/25 kilodaltons (kDa) and one of 16 kDa were identified by Western immunoblotting and isolated by reverse-phase chromatography. The 22/25-kDa fragments correspond to the major approximately 30-kDa glycosylated fragment of IGFBP-3 in serum and the 16-kDa fragment, to one of the same size, that is nonglycosylated. Western ligand blot analysis, affinity cross-linking, and competitive binding experiments using radiolabeled IGF and unlabeled IGF-I or -II showed that in the high performance liquid chromatography eluate containing the 16-kDa fragment, all affinity for IGFs had been lost, whereas the affinity of the 22/25-kDa fragments was considerably reduced. Scatchard analysis of the data indicated a 20-fold loss of affinity for IGF-II and an 50-fold loss for IGF-I compared with that of recombinant human IGFBP-3. In a chick embryo fibroblast assay in which DNA synthesis was stimulated both by IGF-I and by insulin (at 100-fold concentrations, so that interaction with the Type 1 IGF receptor would occur), IGFBP-3 was found to inhibit IGF-I-induced stimulation almost totally. It had no effect on stimulation by insulin, which has no affinity for the IGFBPs. With the 22/25-kDa fragments, barely 50% inhibition of IGF-I stimulation was achieved and no inhibition of insulin stimulation. Unexpectedly, with the fraction containing the 16-kDa fragment (despite the total lack of affinity for IGF-I), IGF-I-induced stimulation was inhibited to nearly the same extent as with intact IGFBP-3. In addition, insulin-induced stimulation was inhibited with similar potency. IGFBP-3 proteolysis therefore generates two types of fragment with different activities. One has weak affinity for IGF-I and is only a weak antagonist of IGF action. The other lacks affinity for the IGFs, but nevertheless inhibits IGF-stimulated mitogenesis, thus acting by a mechanism that is independent of the IGFs.