TAFI (thrombin-activable fibrinolysis inhibitor) is a recently described plasma zymogen that, when exposed to the thrombin-thrombomodulin complex, is converted by proteolysis at Arg92 to a basic carboxypeptidase that inhibits fibrinolysis (TAFIa). The studies described here were undertaken to elucidate the molecular basis for the inhibition of fibrinolysis. When TAFIa is included in a clot undergoing fibrinolysis induced by tissue plasminogen activator and plasminogen, the time to achieve lysis is prolonged, and free arginine and lysine are released over time. In addition, TAFIa prevents a 2.5-fold increase in the rate constant for plasminogen activation which occurs when fibrin is modified by plasmin in the early course of fibrin degradation. The effect is specific for the Glu- form of plasminogen. TAFIa prevents or at least attenuates positive feedback expressed through Lys-plasminogen formation during the process of fibrinolysis initiated by tissue plasminogen activator and plasminogen. TAFIa also inhibits plasmin activity in a clot and prolongs fibrinolysis initiated with plasmin. We conclude that TAFIa suppresses fibrinolysis by removing COOH-terminal lysine and arginine residues from fibrin, thereby reducing its cofactor functions in both plasminogen activation and the positive feedback conversion of Glu-plasminogen to Lys-plasminogen. At relatively elevated concentrations, it also directly inhibits plasmin.