The soluble form of CD40 (sCD40), which co-exists with the membrane-anchored form (mCD40), is a natural antagonist of mCD40/CD154 interaction. However, the mechanism leading to the production of sCD40 has never been investigated. Here, we show that the engagement of mCD40 on the surface of B lymphocytes by anti-CD40 antibody led to enhanced sCD40 release associated with decreased amounts of mCD40. This sCD40 production was not affected by vesicular traffic inhibitors but was completely blocked by a broad-spectrum synthetic metalloproteinase (MP) inhibitor (GM6001) or a membrane-anchored MP-specific inhibitor (dec-RVKR-cmk). Recombinant MP disintegrin tumor necrosis factor-alpha converting enzyme (TACE) cleaved the purified CD40 ectodomain/Fc chimeric protein in vitro, giving rise to an sCD40 form similar to that shed from B cell cultures. Moreover, spontaneous production of sCD40 by mCD40-transfected human embryonic kidney cells (constitutively expressing TACE) was enhanced by the overexpression of TACE and abrogated by co-transfection with a dominant-negative TACE mutant. These results provide strong evidence that sCD40 production is an active process regulated by the engagement of mCD40 and its proteolytic cleavage by TACE or a related MP disintegrin. Given the antagonistic activity of sCD40 on the CD40/CD154 interaction, this shedding mechanism might represent an important negative feedback control of CD40 functions.