Insulin-like growth factor-binding protein-1 (IGFBP-1) is secreted in a highly phosphorylated form that binds IGF-I with high affinity and is resistant to proteolysis. We have purified IGFBP-1-specific protease activity from the urine of an individual with multiple myeloma. This protease efficiently cleaves both phosphorylated and non-phosphorylated IGFBP-1 at Ile130-Ser131, generating fragments that together have higher association and dissociation rates for IGFs compared with intact IGFBP-1. The proteolytic fraction contained azurocidin, a protease homologue hitherto considered inactive. After cleavage of IGFBP-1, there was a lower affinity, but higher capacity for IGF-I binding, suggesting both N- and C-terminal fragments may interact with ligand independently. There was decreased inhibition of IGF-II-stimulated cell growth and glucose uptake. Alone, proteolysed IGFBP-1 stimulated glucose uptake in muscle. We conclude that specific cleavage of IGFBP-1 at target tissues is important in cellular growth and metabolism and opens novel strategies for targeting IGFBP-1 in treatment of disease.