Heparanase is an endoglycosidase that cleaves heparan sulfate (HS), the main polysaccharide of the basement membrane (BM). HS is responsible for BM integrity and barrier function. Hence, enzymatic degradation of HS in the vascular subendothelial BM is a prerequisite for extravasation of immune cells and plasma components during inflammation. Here, we demonstrate a highly coordinated local heparanase induction upon elicitation of delayed-type hypersensitivity (DTH) reaction in the mouse ear. By monitoring in vivo activation of luciferase gene driven by the heparanase promoter, we demonstrate activation of heparanase transcription at an early stage of DTH. We report that heparanase is produced locally by the endothelium at the site of DTH-associated inflammation. Key DTH mediators, tumor necrosis factor-alpha and interferon-gamma, were found to induce heparanase in cultured endothelial cells. Endothelium emerges as an essential cellular source of heparanase enzymatic activity that, in turn, allows for remodeling of the vascular BM, increased vessel permeability, and extravasation of leukocytes and plasma proteins. In vivo administration of antiheparanase siRNA or an inhibitor of heparanase enzymatic activity effectively halted DTH inflammatory response. Collectively, our results highlight the decisive role of endothelial heparanase in DTH inflammation and its potential as a promising target for anti-inflammatory drug development.