In the preceding paper (Hajjar, K. A., Jacovina, A. T., and Chacko, J. (1994) J. Biol. Chem. 269, 21191-21197), we identified a M(r) = 40,000 endothelial cell receptor for tissue plasminogen activator (t-PA) and plasminogen (PLG) as the calcium- and phospholipid-binding protein, annexin II (Ann-II). Here, we examined the effect of Ann-II on t-PA-dependent plasminogen activation in a purified system. Purified native Ann-II bound t-PA, plasminogen, and plasmin with high affinity (Kd = 25 nM, 161 nM, and 75 nM, respectively). At fixed plasminogen concentrations, preincubation with purified native Ann-II was associated with an approximately 21-fold increase in the rate of Glu-PLG activation and an approximately 14-fold increase in activation of Lys-PLG. Three irrelevant proteins had no effect on plasmin formation, while fibrinogen increased the rate of Glu-PLG activation by approximately 4-fold. Annexin-II-mediated enhancement of t-PA-dependent plasminogen activation was 90-95% inhibited by epsilon-aminocaproic acid or by pretreatment of Ann-II with carboxypeptidase B, indicating a carboxyl-terminal lysine-dependent interaction. Kinetic analyses revealed that Ann-II conferred an approximately 60-fold increase in catalytic efficiency upon t-PA-dependent activation of either Glu-PLG or Lys-PLG. Thus, Ann-II-mediated assembly of plasminogen and t-PA may promote and localize constitutive plasmin generation on the surface of the blood vessel wall.