Transglutaminase (TGase) enzymes catalyze the formation of covalent cross-links between protein-bound glutamines and lysines in a calcium-dependent manner, but the role of Ca(2+) ions remains unclear. The TGase 3 isoform is widely expressed and is important for epithelial barrier formation. It is a zymogen, requiring proteolysis for activity. We have solved the three-dimensional structures of the zymogen and the activated forms at 2.2 and 2.1 A resolution, respectively, and examined the role of Ca(2+) ions. The zymogen binds one ion tightly that cannot be exchanged. Upon proteolysis, the enzyme exothermally acquires two more Ca(2+) ions that activate the enzyme, are exchangeable and are functionally replaceable by other lanthanide trivalent cations. Binding of a Ca(2+) ion at one of these sites opens a channel which exposes the key Trp236 and Trp327 residues that control substrate access to the active site. Together, these biochemical and structural data reveal for the first time in a TGase enzyme that Ca(2+) ions induce structural changes which at least in part dictate activity and, moreover, may confer substrate specificity.