The extracellular domain of a heterogeneous group of transmembrane proteins can be proteolytically released from the cell surface, a process known as protein ectodomain shedding. Despite the biomedical importance of several substrates of the shedding system, such as the beta-amyloid precursor protein (betaAPP), little is known about the regulation of protein ectodomain shedding, and the only protease known to be involved is the metalloprotease disintegrin, tumor necrosis factor-alpha converting enzyme (TACE). Here, we show that previously described pro-transforming growth factor-alpha shedding-defective cell mutants (M2 cells), known to be defective in ectodomain shedding of several molecules, that include betaAPP, fail to shed the ectodomain of pro-TNF-alpha. The target of the mutation is a component required for TACE activity, since transfection of TACE into M2 cells has no effect on the shedding of pro-TNF-alpha and somatic cell fusions between M2 cells and TACE null cells recover the ability to shed pro-TNF-alpha, pro-transforming growth factor-alpha, and betaAPP. Furthermore, we show that TACE is also necessary for the shedding of betaAPP since TACE null cells show defective betaAPP shedding. Biochemical evidence shows that the component that controls TACE is different from protein kinase C, the only known activator of protein ectodomain shedding, and that this component does not affect biosynthesis or processing of TACE or other metalloprotease disintegrins. The component mutated in M2 cells is likely to control only a subset of metalloprotease disintegrins involved in regulated ectodomain shedding, since Notch processing, a process known to be dependent on the activity of another metalloprotease disintegrin, Kuzbanian, is normal in M2 cells.