Protein S expresses cofactor activity for activated protein C (APC) by enhancing the APC-catalyzed proteolysis at R(306) in factor Va. It is generally accepted that only free protein S is active and that complex formation with C4b-binding protein (C4BP) inhibits the APC-cofactor activity of protein S. However, the present study shows that protein S-C4BP expresses APC-cofactor activity and stimulates APC-catalyzed proteolysis at R(306) more than 10-fold, but instead inhibits proteolysis at R(506) by APC 3- to 4-fold. Free protein S stimulates APC-catalyzed cleavage at R(306) approximately 20-fold and has no effect on cleavage at R(506). The resulting net effect of protein S-C4BP complex formation on APC-catalyzed factor Va inactivation is a 6- to 8-fold reduction in factor Va inactivation when compared with free protein S, which is not explained by inhibition of APC-cofactor activity of protein S at R(306), but by generation of a specific inhibitor for APCcatalyzed proteolysis at R(506) of factor Va. These results are of interest for carriers of the factor V(Leiden) mutation (R(506)Q), as protein S-C4BP effectively enhances APC-catalyzed factor Va (R(306)) inactivation in plasma containing factor V(Leiden).