Hepatocyte growth factor activator inhibitor-1 (HAI-1) is a type I transmembrane protein and inhibitor of several serine proteases, including hepatocyte growth factor activator and matriptase. The protein is essential for development as knockout mice die in utero due to placental defects caused by misregulated extracellular proteolysis. HAI-1 contains two Kunitz-type inhibitor domains (Kunitz), which are generally thought of as a functionally self-contained protease inhibitor unit. This is not the case for HAI-1, where our results reveal how interdomain interactions have evolved to stimulate the inhibitory activity of an integrated Kunitz. Here we present an x-ray crystal structure of an HAI-1 fragment covering the internal domain and Kunitz-1. The structure reveals not only that the previously uncharacterized internal domain is a member of the polycystic kidney disease domain family but also how the two domains engage in interdomain interactions. Supported by solution small angle x-ray scattering and a combination of site-directed mutagenesis and functional assays, we show that interdomain interactions not only stabilize the fold of the internal domain but also stimulate the inhibitory activity of Kunitz-1. By completing our structural characterization of the previously unknown N-terminal region of HAI-1, we provide new insight into the interplay between tertiary structure and the inhibitory activity of a multidomain protease inhibitor. We propose a previously unseen mechanism by which the association of an auxiliary domain stimulates the inhibitory activity of a Kunitz-type inhibitor (i.e. the first structure of an intramolecular interaction between a Kunitz and another domain).