Activated protein C (APC) down-regulates thrombin formation through proteolytic inactivation of factor Va (FVa) by cleavage at Arg(506) and Arg(306) and of factor VIIIa (FVIIIa) by cleavage at Arg(336) and Arg(562). To study substrate recognition by APC, active site-mutated APC (APC(S360A)) was used, which lacks proteolytic activity but exhibits anticoagulant activity. Experiments in model systems and in plasma show that APC(S360A), and not its zymogen protein C(S360A), expresses anticoagulant activities by competing with activated coagulation factors X and IX for binding to FVa and FVIIIa, respectively. APC(S360A) bound to FVa with a K(D) of 0.11 +/- 0.05 nm and competed with active site-labeled Oregon Green activated coagulation factor X for binding to FVa. The binding of APC(S360A) to FVa was not affected by protein S but was inhibited by prothrombin. APC(S360A) binding to FVa was critically dependent upon the presence of Arg(506) and not Arg(306) and additionally required an active site accessible to substrates. Inhibition of FVIIIa activity by APC(S360A) was >100-fold less efficient than inhibition of FVa. Our results show that despite exosite interactions near the Arg(506) cleavage site, binding of APC(S360A) to FVa is almost completely dependent on Arg(506) interacting with APC(S360A) to form a nonproductive Michaelis complex. Because docking of APC to FVa and FVIIIa constitutes the first step in the inactivation of the cofactors, we hypothesize that the observed anticoagulant activity may be important for in vivo regulation of thrombin formation.