Endostatin, a potent inhibitor of angiogenesis and tumor growth, is a COOH-terminal fragment of collagen XVIII derived through cleavage of an Ala-His linkage by an as yet unidentified endostatin-processing enzyme. Endostatin was originally isolated from the conditioned medium of hemangioendothelioma (EOMA) cells. By investigating the processing of collagen XVIII to endostatin by EOMA cells, we show here that the generation of endostatin can be mediated by an elastase activity. We also show that several members of the elastase family can act as an endostatin-processing enzyme by specifically cleaving the Ala-His linkage and releasing endostatin from a precursor molecule. We further suggest that the generation of endostatin from collagen XVIII is at least a two-step process, involving a metal-dependent early step and an elastase activity-dependent final step.