Most cell types express transforming growth factor-beta (TGF-beta) as a large latent TGF-beta complex that must be converted to an active form before TGF-beta can interact with cell surface TGF-beta receptors. This conversion involves the release of mature TGF-beta from the complex by disrupting noncovalent interactions between mature TGF-beta and its propeptide, latency associated peptide. A critical step in regulating TGF-beta effects may be the activation of the large latent TGF-beta complex. Activation of the complex can be achieved by chemical and enzymatic treatments, or by various cell systems. We have identified that coculturing bovine endothelial and smooth muscle cells generates active TGF-beta. Coculture activation of the large latent TGF-beta complex occurs through a plasmin-dependent mechanism that requires concentration of reactants on the cell surface and/or extracellular matrix. The mechanism of latent TGF-beta activation self-regulates through effectors of plasmin generation.