Co-expression of membrane-type 1 (MT1)-MMP with hepatocyte growth factor activator inhibitor-1 (HAI-1) in HEK293T cells resulted in cleavage of HAI-1 to produce three fragments. Recombinant MT1-MMP was shown to cleave HAI-1 protein in vitro. Hepatocyte growth factor activator inhibitor-1 was initially identified as the cognate inhibitor of matriptase, a transmembrane serine protease that processes urokinase-type plasminogen activator (uPA). Co-expression of HAI-1 with matriptase suppressed matriptase protease activity, and co-expression of MT1-MMP with them resulted in recovery of matriptase activity by stimulating shedding of HAI-1 fragments. Matriptase protein was detected in squamous carcinoma-derived HSC-4 cells, however, matriptase protease activity was undetectable. Transfection of siRNA for HAI-1 enhanced serine protease activity, which was suppressed by cotransfection of matriptase siRNA. Collagen-gel culture or treatment with concanavalin A (ConA) of HSC-4 cells enhanced MT1-MMP activity, which induced shedding of HAI-1 fragments and conversely stimulated uPA activation by these cells. Serine protease activity, including uPA activation of cells treated with ConA, was abrogated by downregulation of either matriptase or MT1-MMP through the transfection of each siRNA. These results suggest that MT1-MMP induced by collagen-gel culture or ConA treatment causes cleavage and shedding of HAI-1 protein, which allows activation of matriptase in HSC-4 cells. HSC-4 cells showed a characteristic invasive growth by forming vacuole-like structures in collagen gel, which was suppressed by transfection of siRNA for either MT1-MMP or matriptase, suggesting that activation of matriptase through the cleavage of HAI-1 is one of the MT1-MMP multifunctions essential for invasive growth of HSC-4 cells. (Cancer Sci 2012; 103: 448–454)