Hepatocyte growth factor (HGF), the ligand for the receptor tyrosine kinase Met, is secreted as single chain pro-HGF that lacks signaling activity. Pro-HGF acquires functional competence upon cleavage between R494 and V495, generating a disulfide-linked alpha/beta-heterodimer, where the beta-chain of HGF (HGF beta) has a serine protease fold that lacks enzymatic activity. We show that, like serine proteases, insertion of the newly formed N terminus in the beta-chain is critical for activity, here by allosterically stabilizing interactions with Met. The HGF beta crystal structure shows that V495 inserts into the "activation pocket" near the Met binding site where the positively charged N terminus forms a salt bridge with the negatively charged D672, and the V495 side chain has hydrophobic interactions with main- and side-chain residues. Full-length two-chain HGF mutants designed to interrupt these interactions (D672N, V495G, V495A, G498I, and G498V) displayed <10% activity in Met receptor phosphorylation, cell migration, and proliferation assays. Impaired signaling of full-length mutants correlated with >50-fold decreases in Met binding of the low-affinity HGF beta domain alone bearing the same mutations and further correlated with impaired N-terminal insertion. Because high-affinity binding resides in the HGF alpha-chain, full-length mutants maintained normal Met binding and efficiently inhibited HGF-mediated Met activation. Conversion of HGF from agonist to antagonist was achieved by as little as removal of two methyl groups (V495A) or a single charge (D672N). Thus, although serine proteases and HGF have quite distinct functions in proteolysis and Met signal transduction, respectively, they share a similar activation mechanism.