Hepatocyte growth factor activator inhibitor-1 (HAI-1) was initially identified as cognate inhibitor of matriptase, a membrane-bound serine protease. Paradoxically, HAI-1 is also required for matriptase activation, a process that requires sphingosine 1-phosphate (S1P)-mediated translocation of the protease to cell-cell junctions in human mammary epithelial cells. In the present study, we further explored how HAI-1 regulates this protease. First, we observed that after S1P treatment HAI-1 was cotranslocated with matriptase to cell-cell junctions and that the cellular ratio of HAI-1 to matriptase was maintained during this process. However, when this ratio was changed by cell treatment with HAI-1 small interfering RNA or anti-HAI-1 MAb M19, spontaneous activation of matriptase occurred in the absence of S1P-induced translocation; S1P-induced matriptase activation was also enhanced. These results support a role for HAI-1 in protection of cell from uncontrolled matriptase activation. We next expressed matriptase, either alone or with HAI-1 in breast cancer cells that do not endogenously express either protein. A defect in matriptase trafficking to the cell surface occurred if wild-type matriptase was expressed in the absence of HAI-1; this defect appeared to result from matriptase toxicity to cells. Coexpression with matriptase of wild-type HAI-1, but not HAI-1 mutants altered in its Kunitz domain 1, corrected the trafficking defect. In contrast, catalytically defective matriptase mutants were normal in their trafficking in the absence of HAI-1. These results are also consistent with a role for HAI-1 to prevent inappropriate matriptase proteolytic activity during its protein synthesis and trafficking. Taken together, these results support multiple roles for HAI-1 to regulate matriptase, including its proper expression, intracellular trafficking, activation, and inhibition.