Smooth muscle cells (SMC) secrete a serine protease that cleaves insulin-like growth factor (IGF) binding protein (IGFBP)-4 into fragments that have low affinity for IGF-1. When IGFBP-4 is added to monolayer cultures of cell types that do not secrete this protease, TGF-1 stimulation of DNA synthesis is significantly inhibited. In contrast, if cell types that secrete this protease are used, IGFBP-4 is a much less potent inhibitor. These studies were conducted to determine whether proteolysis of IGFBP-4 accounted for its reduced capacity to inhibit IGF-l-stimulated DNA synthesis. The cleavage site in IGFBP-4 that the SMC protease uses was determined to be lysine(120), histidine(121). A protease-resistant mutant form of IGFBP-4 was prepared, expressed, purified, and tested for biologic activity using porcine SMC cultures. Addition of the protease-resistant mutant resulted in inhibition of DNA and cell migration responses to IGF-1. The inhibition was concentration dependent and was maximal when 500 ng/ml (20 nM) of the mutant was added with 20 ng/ml (2.8 nM) of IGF-1. When the mutant was added in the absence of IGF-1, it had no activity. The results show that cleavage of IGFBP-4 at lysine(120), histidine(121) results in inactivation of the ability of IGFBP-4 to bind to IGF-1. Creation of a mutant form of IGFBP-4 that was not cleaved by the protease resulted in inhibition of IGF-l-stimulated actions. The results suggest that IGFBP-4 can act as a potent inhibitor of the anabolic effects of IGF-1 and that the variables that regulate protease activity may indirectly regulate IGF-1 actions.