Previous studies have shown that matrix vesicles isolated from cultures of costochondral growth zone chondrocytes and treated with 1alpha,25-dihydroxyvitamin D3 [1alpha,25(OH)2D3] can activate recombinant human latent transforming growth factor beta1 (rhTGF-beta1). It is unknown what enzyme or other factor in the extracellular organelles is responsible for the activation. This study tested the hypothesis that enzymes present in matrix vesicles can activate latent TGF-beta1 and that this is regulated by 1alpha,25(OH)2D3. To do this, we examined the ability of matrix vesicle extracts to activate small latent rhTGF-beta1. In addition, enzymes previously determined to be present in matrix vesicles were screened for their ability to activate small latent rhTGF-beta1. Recombinant human matrix metalloproteinase 2 (rhMMP-2; 72 kDa gelatinase), rhMMP-3 (stromelysin 1), purified human plasminogen, and purified urokinase (plasminogen activator) were each tested at varying concentrations. To assess the role of cell maturation, we used a cell culture model in which chondrocytes are derived from two distinct zones of rat costochondral cartilage, the resting zone and the growth zone. Matrix vesicles were isolated from these cultures and then tested. The results showed that extracts of matrix vesicles produced by both growth zone and resting zone chondrocytes were able to activate small latent rhTGF-beta1. The effects were dose and time dependent, with greater activity being found in extracts of matrix vesicles from the growth zone chondrocyte cultures. Only rhMMP-3 was able to activate small latent rhTGF-beta1, indicating that stromelysin-1, but not MMP-2, plasminogen, or urokinase, was involved. As observed in the extracts, the effect of rhMMP-3 was time and dose dependent. When anti-MMP-3 antibody was added to matrix vesicle extracts from both cell types, activation of small latent rhTGF-beta1 was dose-dependently blocked. Neither 1alpha,25(OH)2D3 nor 24R,25(OH)2D3 had a direct effect on activation of small latent rhTGF-beta1 by the extracts. However, when intact matrix vesicles were treated with 1alpha,25(OH)2D3, their ability to activate small latent rhTGF-beta1 was increased. Inhibition of phospholipase A2 with quinacrine blocked the 1alpha,25(OH)2D3-dependent effect. These results suggest that the ability of 1alpha,25(OH)2D3-treated matrix vesicles to activate small latent TGF-beta1 is via action of the secosteroid on the matrix vesicle membrane, not on the enzymes responsible for activating latent TGF-beta1. Because matrix vesicles isolated from growth zone chondrocytes have been shown to contain increased phospholipase A2 activity after treatment with 1alpha,25(OH)2D3, it is likely that this secosteroid promotes loss of membrane integrity through phospholipase A2-dependent formation of lysophospholipids, resulting in the release of MMP-3 into the matrix, where latent TGF-beta1 is stored. Taken together, the results of the current study show that matrix vesicles produced by growth plate chondrocytes contain MMP-3, that this enzyme is at least partially responsible for activation of small latent TGF-beta1 in the matrix, and that 1alpha,25(OH)2D3 regulates MMP release from matrix vesicles.