TRACP is synthesized as a latent proenzyme requiring proteolytic processing to attain maximal phosphatase activity. Excision of an exposed loop domain abolishes the interaction between the loop residue Asp146 and a ligand to the redox-sensitive iron of the active site, most likely Asn91, providing a mechanism for the enzyme repression. Both cathepsin K and L efficiently cleave in the loop domain and activate the latent enzyme, and we propose that cathepsin K acts as a physiological activator of TRACP in osteoclasts, whereas cathepsin L might fulfill a similar role in different types of macrophages. Considering the rather broad substrate specificity of TRACP, a tight regulation of its activity in the cell appears warranted. Besides proteolytic cleavage, the enzyme should need a specific local environment with a slightly acidic pH and reducing equivalents to keep the enzyme fully active. Cellular subcompartments where these required conditions prevail are potential subcellular site(s) of TRACP action. Of bone phosphoproteins shown to be substrates for TRACP, both osteopontin and bone sialoprotein are colocalized with TRACP in the resorption lacuna of the osteoclasts, and dephosphorylation of OPN impair its ability to promote adhesion as well as migration of osteoclasts in vitro. A role for TRACP as an osteopontin phosphatase in bone is therefore suggested. The expression of TRACP as well as OPN in other tissues with possible interactions between the two could suggest a more general function for TRACP as a regulator of OPN phosphorylation and bioactivity.