Human HT-1080 fibrosarcoma cells produce urokinase-type plasminogen activator (u-PA) and type 1 plasminogen activator inhibitor (PAI-1). We found that after incubation of monolayer cultures with purified native human plasminogen in serum-containing medium, bound plasmin activity could be eluted from the cells with tranexamic acid, an analogue of lysine. The bound plasmin was the result of plasminogen activation on the cell surface; plasmin activity was not taken up onto cells after deliberate addition of plasmin to the serum-containing medium. The cell surface plasmin formation was inhibited by an anticatalytic monoclonal antibody to u-PA, indicating that this enzyme was responsible for the activation. Preincubation of the cells with diisopropyl fluorophosphate-inhibited u-PA led to a decrease in surface-bound plasmin, indicating that a large part, if not all, of the cell surface plasminogen activation was catalyzed by surface-bound u-PA. In the absence of plasminogen, most of the cell surface u-PA was present in its single-chain proenzyme form, while addition of plasminogen led to formation of cell-bound two-chain u-PA. The latter reaction was catalyzed by cell-bound plasmin. Cell-bound u-PA was accessible to inhibition by endogenous PAI-1 and by added PAI-2, while the cell-bound plasmin was inaccessible to serum inhibitors, but accessible to added aprotinin and an anticatalytic monoclonal antibody. A model for cell surface plasminogen activation is proposed in which plasminogen binding to cells from serum medium is followed by plasminogen activation by trace amounts of bound active u-PA, to form bound plasmin, which in turn serves to produce more active u-PA from bound pro-u-PA. This exponential process is subject to regulation by endogenous PAI-1 and limited to the pericellular space.