We previously implicated tumor necrosis factor-alpha converting enzyme (TACE/ADAM17) in the processing of the integral membrane precursor to soluble transforming growth factor-alpha (TGF-alpha), pro-TGF-alpha. Here we examined TGF-alpha processing in a physiologically relevant cell model, primary keratinocytes, showing that cells lacking TACE activity shed dramatically less TGF-alpha as compared with wild-type cultures and that TGF-alpha cleavage was partially restored by infection of TACE-deficient cells with TACE-encoding adenovirus. Moreover, cotransfection of TACE-deficient fibroblasts with pro-TGF-alpha and TACE cDNAs increased shedding of mature TGF-alpha with concomitant conversion of cell-associated pro-TGF-alpha to a processed form. Purified TACE accurately cleaved pro-TGF-alpha in vitro at the N-terminal site and also cleaved a soluble form of pro-TGF-alpha containing only the ectodomain at the C-terminal site. In vitro, TACE accurately cleaved peptides corresponding to cleavage sites of several epidermal growth factor (EGF) family members, and transfection of TACE into TACE-deficient cells increased the shedding of amphiregulin and heparin-binding EGF (HB-EGF) proteins. Consistent with the hypothesis that TACE regulates EGF receptor (EGFR) ligand availability in vivo, mice heterozygous for Tace and homozygous for an impaired EGFR allele (wa-2) were born with open eyes significantly more often than Tace(+/+)Egfr(wa-2)(/)(wa-2) counterparts. Collectively, these data support a broad role for TACE in the regulated shedding of EGFR ligands.