The type 2 transmembrane serine protease matriptase is under tight control primarily by the actions of the integral membrane Kunitz-type serine protease inhibitor HAI-1. Growing evidence indicates that HAI-2 might also be involved in matriptase inhibition in some contexts. Here we showed that matriptase inhibition by HAI-2 depends on the subcellular localizations of HAI-2, and is observed in breast cancer cells but not in mammary epithelial cells. HAI-2 is co-expressed with matriptase in 21 out of 26 human epithelial and carcinoma cells examined. HAI-2 is also a potent matriptase inhibitor in solution, but in spite of this, HAI-2 inhibition of matriptase is not observed in all contexts where HAI-2 is expressed, unlike what is seen for HAI-1. Induction of matriptase zymogen activation in mammary epithelial cells results in the formation of matriptase-HAI-1 complexes, but matriptase-HAI-2 complexes are not observed. In breast cancer cells, however, in addition to the appearance of matriptase-HAI-1 complex, three different matriptase-HAI-2 complexes, are formed following the induction of matriptase activation. Immunofluorescent staining reveals that activated matriptase is focused at the cell-cell junctions upon the induction of matriptase zymogen activation in both mammary epithelial cells and breast cancer cells. HAI-2, in contrast, remains localized in vesicle/granule-like structures during matriptase zymogen activation in human mammary epithelial cells. In breast cancer cells, however, a proportion of the HAI-2 reaches the cell surface where it can gain access to and inhibit active matriptase. Collectively, these data suggest that matriptase inhibition by HAI-2 requires the translocation of HAI-2 to the cell surface, a process which is observed in some breast cancer cells but not in mammary epithelial cells.