Carboxypeptidase M (EC 3.4.17.12) belongs to the family of the carboxypeptidases. These enzymes remove C-terminal amino acids from peptides and proteins and exert roles in the physiological processes of blood coagulation/fibrinolysis, inflammation, food digestion and pro-hormone and neuropeptide processing. Among the carboxypeptidases CPM is of particular importance because of its constitutive expression in an active form at the surface of specialized cells and tissues in the human body. Despite the fact that the function(s) of this enzyme is not fully understood several suggestions have been made since its discovery more than two decades ago. Based on potential substrates and its presence, often on the boundary between the host and environment, a role in inflammation was proposed. This review describes how recent discoveries affected the insights in the cellular and physiological functions of CPM. A critical analysis of the potential endogenous peptide and protein substrates is provided. The distribution of CPM on different cell types and tissues and its expression in states of disease are discussed. There is evidence that CPM functions not only as a protease but also as a binding partner in cell-surface protein-protein interactions.