Shedding of TNF-alpha requires a single cleavage event, whereas the ectodomain of proTGF-alpha is cleaved at N-proximal (N-terminal) and membrane proximal (C-terminal) sites to release mature TGF-alpha. Tumor necrosis factor-alpha converting enzyme (TACE) was shown to have a central role in the shedding of both factors. Here we show that cleavage of the proTGF-alpha C-terminal site, required for release of mature growth factor, is less sensitive to a panel of hydroxamates than TNF-alpha processing. Recombinant TACE cleaves TNF-alpha and N-terminal TGF-alpha peptides 50-fold more efficiently than the C-terminal TGF-alpha peptide. Moreover, fractionation of rat liver epithelial cell membranes yields two populations: one contains TACE and cleaves peptides corresponding to TNF-alpha and both proTGF-alpha processing sites, while the other lacks detectable TACE and cleaves only the C-terminal proTGF-alpha processing site. Activities in both fractions are inhibited by hydroxamates and EDTA but not by cysteine, aspartate, or serine protease inhibitors. Both membrane fractions also contain ADAM 10. ADAM 10 correctly cleaves peptides and a soluble form of precursor TGF-alpha (proTGFecto) at the N-terminal site but not the C-terminal site. However, the kinetics of N-terminal peptide cleavage by ADAM 10 are 90-fold less efficient than TACE. Our findings indicate that while TACE is an efficient proTGF-alpha N-terminal convertase, a different activity, distinguishable from TACE, exists that can process proTGF-alpha at the C-terminal site. A model that accounts for these findings and the requirement for TACE in TGF-alpha shedding is proposed.