We report the identification and functional analysis of a type II transmembrane serine protease encoded by the mouse differentially expressed in squamous cell carcinoma (DESC) 1 gene, and the definition of a cluster of seven homologous DESC1-like genes within a 0.5-Mb region of mouse chromosome 5E1. This locus is syntenic to a region of human chromosome 4q13.3 containing the human orthologues of four of the mouse DESC1-like genes. Bioinformatic analysis indicated that all seven DESC1-like genes encode functional proteases. Direct cDNA cloning showed that mouse DESC1 encodes a multidomain serine protease with an N-terminal signal anchor, a SEA (sea urchin sperm protein, enterokinase, and agrin) domain, and a C-terminal serine protease domain. The mouse DESC1 mRNA was present in epidermal, oral, and male reproductive tissues and directed the translation of a membrane-associated 60-kDa N-glycosylated protein with type II topology. Mouse DESC1 was synthesized in insect cells as a zymogen that could be activated by exposure to trypsin. The purified activated DESC1 hydrolyzed synthetic peptide substrates, showing a preference for Arg in the P 1 position. DESC1 proteolytic activity was abolished by generic inhibitors of serine proteases but not by other classes of protease inhibitors. Most interestingly, DESC1 formed stable inhibitory complexes with both plasminogen activator inhibitor-1 and protein C inhibitor that are expressed in the same tissues with DESC1, suggesting that type II transmembrane serine proteases may be novel targets for serpin inhibition. Together, these data show that mouse DESC1 encodes a functional cell surface serine protease that may have important functions in the epidermis, oral, and reproductive epithelium.Pericellular proteolysis is essential to all aspects of vertebrate life, including development, tissue homeostasis, tissue remodeling, tissue repair, and reproduction, and dysregulated pericellular proteolysis is causally related to a large number of diseases in humans. Within the past century, the most extensive studies of pericellular proteolysis in health and disease focused on defining the contribution of a relatively limited number of proteases belonging to the families of plasminogen activators, matrix metalloproteinases, and cathepsins (1-6). However, the recent completion of the mouse and human genome sequences, and the generation of extensive mouse and human EST 1 data bases, facilitated an explosion in the discovery of novel candidate protease genes, indicating that a vastly larger repertoire of pericellular proteases may be engaged in these processes than previously anticipated (7,8). Particularly noteworthy in this context was the unveiling of an unexpectedly large family of type II transmembrane serine proteases (TTSPs) (9 -23). This rapidly expanding family of serine proteases is defined by the presence of an N-terminal signal anchor and a C-terminal serine protease domain, separated by a stem region containing an array of protein domains that varies widely between individual...