SPARC (osteonectin/BM40) is a secreted protein that modifies the interaction of cells with extracellular matrix (ECM). When we added SPARC to cultured rabbit synovial fibroblasts and analyzed the secreted proteins, we observed an increase in the expression of three metalloproteinases--collagenase, stromelysin, and the 92-kD gelatinase--that together can degrade both interstitial and basement membrane matrices. We further characterized the regulation of one of these metalloproteinases, collagenase, and showed that both collagenase mRNA and protein are upregulated in fibroblasts treated with SPARC. Experiments with synthetic SPARC peptides indicated that a region in the neutral alpha-helical domain III of the SPARC molecule, which previously had no described function, was involved in the regulation of collagenase expression by SPARC. A sequence in the carboxyl-terminal Ca(2+)-binding domain IV exhibited similar activity, but to a lesser extent. SPARC induced collagenase expression in cells plated on collagen types I, II, III, and V, and vitronectin, but not on collagen type IV. SPARC also increased collagenase expression in fibroblasts plated on ECM produced by smooth muscle cells, but not in fibroblasts plated on a basement membrane-like ECM from Engelbreth-Holm-Swarm sarcoma. Collagenase was induced within 4 h in cells treated with phorbol diesters or plated on fibronectin fragments, but was induced after 8 h in cells treated with SPARC. A number of proteins were transiently secreted by SPARC-treated cells within 6 h of treatment. Conditioned medium that was harvested from cultures 7 h after the addition of SPARC, and depleted of residual SPARC, induced collagenase expression in untreated fibroblasts; thus, part of the regulation of collagenase expression by SPARC appears to be indirect and proceeds through a secreted intermediate. Because the interactions of cells with ECM play an important role in regulation of cell behavior and tissue morphogenesis, these results suggest that molecules like SPARC are important in modulating tissue remodeling and cell-ECM interactions.