Transforming growth factor-alpha (TGF-alpha) is a member of the EGF growth factor family. Both transmembrane TGF-alpha and the proteolytically released soluble TGF-alpha can bind to the EGF/TGF-alpha tyrosine kinase receptor (EGFR) and activate the EGFR-induced signaling pathways. We now demonstrate that transmembrane TGF-alpha physically interacts with CD9, a protein with four membrane spanning domains that is frequently coexpressed with TGF-alpha in carcinomas. This interaction was mediated through the extracellular domain of transmembrane TGF-alpha. CD9 expression strongly decreased the growth factor- and PMA- induced proteolytic conversions of transmembrane to soluble TGF-alpha and strongly enhanced the TGF- alpha-induced EGFR activation, presumably in conjunction with increased expression of transmembrane TGF-alpha. In juxtacrine assays, the CD9-induced EGFR hyperactivation by transmembrane TGF-alpha resulted in increased proliferation. In contrast, CD9 coexpression with transmembrane TGF-alpha decreased the autocrine growth stimulatory effect of TGF-alpha in epithelial cells. This decrease was associated with increased expression of the cdk inhibitor, p21(CIP1). These data reveal that the association of CD9 with transmembrane TGF-alpha regulates ligand-induced activation of the EGFR, and results in altered cell proliferation.