Activation of the matrix metalloproteinase 2 (MMP-2) has been shown to play a major role in the proteolysis of extracellular matrix (ECM) associated with tumor invasion. Although the precise mechanism of this activation remains elusive, levels of the membrane type 1-MMP (MT1-MMP) at the cell surface and of the tissue inhibitor of MMP-2 (TIMP-2) appear to be two important determinants. Induction of MMP-2 activation in cells cultivated on collagen type I gels indicated that the ECM is important in the regulation of this process. In this study, we show that SPARC/osteonectin, a small ECM-associated matricellular glycoprotein, can induce MMP-2 activation in two invasive breast cancer cell lines (MDA-MB-231 and BT549) but not in a noninvasive counterpart (MCF-7), which lacks MT1-MMP. Using a set of peptides from different regions of SPARC, we found that peptide 1.1 (corresponding to the NH2-terminal region of the protein) contained the activity that induced MMP-2 activation. Despite the requirement for MT1-MMP, seen in MCF-7 cells transfected with MT1-MMP, the activation of MMP-2 by SPARC peptide 1.1 was not associated with increased steady-state levels of MT1-MMP mRNA or protein in either MT1-MMP-transfected MCF-7 cells or constitutively expressing MDA-MB-231 and BT549 cells. We did, however, detect decreased levels of TIMP-2 protein in the media of cells incubated with peptide 1.1 or recombinant SPARC; thus, the induction of MMP-2 activation by SPARC might be due in part to a diminution of TIMP-2 protein. We conclude that SPARC, and specifically its NH2-terminal domain, regulates the activation of MMP-2 at the cell surface and is therefore likely to contribute to the proteolytic pathways associated with tumor invasion.