CSF-1 is a hemopoietic growth factor, which plays an essential role in macrophage and osteoclast development. Alternative splice variants of CSF-1 are synthesized as soluble or membrane-anchored molecules, although membrane CSF-1 (mCSF-1) can be cleaved from the cell membrane to become soluble CSF-1. The activities involved in this proteolytic processing, also referred to as ectodomain shedding, remain poorly characterized. In the present study, we examined the properties of the mCSF-1 sheddase in cell-based assays. Shedding of mCSF-1 was up-regulated by phorbol ester treatment and was inhibited by the metalloprotease inhibitors GM6001 and tissue inhibitor of metalloproteases 3. Moreover, the stimulated shedding of mCSF-1 was abrogated in fibroblasts lacking the TNF-alpha converting enzyme (TACE, also known as a disintegrin and metalloprotease 17) and was rescued by expression of wild-type TACE in these cells, strongly suggesting that the stimulated shedding is TACE dependent. Additionally, we observed that mCSF-1 is predominantly localized to intracellular membrane compartments and is efficiently internalized in a clathrin-dependent manner. These results indicate that the local availability of mCSF-1 is actively regulated by ectodomain shedding and endocytosis. This mechanism may have important implications for the development and survival of monocyte lineage cells.