SPARC (secreted protein, acidic and rich in cysteine), also called osteonectin or BM-40, is a collagen-binding glycoprotein secreted by a variety of cells and is associated with functional responses involving tissue remodeling, cell movement and proliferation. Because SPARC and monocytes/macrophages are prevalent at sites of inflammation and remodeling in which there is connective tissue turnover, we examined the effect of SPARC on monocyte matrix metalloproteinase (MMP) production. Treatment of human peripheral blood monocytes with SPARC stimulated the production of gelatinase B (MMP-9) and interstitial collagenase (MMP-1). Experiments with synthetic peptides indicated that peptide 3.2, belonging to the alpha helical domain III of SPARC, is the major peptide mediating the MMP production by monocytes. SPARC and peptide 3.2 were also shown to induce prostaglandin synthase (PGHS)-2 as determined by Western and Northern blot analyses. The increase in PGHS-2 stimulated by SPARC or peptide 3.2 correlated with substantially elevated levels of prostaglandin E2 (PGE2) and other arachidonic acid metabolites as measured by radioimmunoassay and high performance liquid chromatography (HPLC), respectively. Moreover, the synthesis of MMP was dependent on the generation of PGE2 by PGHS-2, since indomethacin inhibited the production of these enzymes and their synthesis was restored by addition of exogenous PGE2 or dibutyryl cAMP (Bt2cAMP). These results demonstrate that SPARC might play a significant role in the modulation of connective tissue turnover due to its stimulation of PGHS-2 and the subsequent release of PGE2, a pathway that leads to the production of MMP by monocytes.