CUB-domain-containing protein 1 (CDCP1) is an integral membrane glycoprotein with potential as a marker and therapeutic target for a number of cancers. Here we examine mechanisms regulating cellular processing of CDCP1. By analyzing cell lines exclusively passaged non-enzymatically and through use of a panel of protease inhibitors, we demonstrate that full-length 135 kDa CDCP1 is post-translationally processed in a range of cell lines by a mechanism involving serine protease activity, generating a C-terminal 70-kDa fragment. Immunopurification and N-terminal sequencing of this cell-retained fragment and detailed mutagenesis, show that proteolytic processing of CDCP1 occurs at two sites, Arg-368 and Lys-369. We show that the serine protease matriptase is an efficient, but not essential, cellular processor of CDCP1 at Arg-368. Importantly, we also demonstrate that proteolysis induces tyrosine phosphorylation of 70-kDa CDCP1 and recruitment of Src and PKCdelta to this fragment. In addition, Western blot and mass spectroscopy analyses show that an N-terminal 65-kDa CDCP1 ectodomain is shed intact from the cell surface. These data provide new insights into mechanisms regulating CDCP1 and suggest that the biological role of this protein and, potentially, its function in cancer, may be mediated by both 70-kDa cell retained and 65-kDa shed fragments, as well as the full-length 135-kDa protein.