Limited proteolysis of insulin-like growth factor-binding protein-3 (IGFBP-3) is a normal process in the regulation of insulin-like growth factor (IGF) activity, which we have reproduced in vitro using plasmin and recombinant human non-glycosylated IGFBP-3 in order to isolate and characterize the fragments obtained. Two major fragments of 22-25 and 16 kD were purified by RP-HPLC. The 22- to 25-kD fragment had severely reduced affinity for IGF-I, compared with intact IGFBP-3. It weakly inhibited cell proliferation stimulated by IGF-I and had no effect on insulin-induced stimulation. The 16-kD fragment, which had lost all affinity for IGFs, unexpectedly proved to be a potent inhibitor of both IGF-I-induced and insulin-induced cell growth. This proteolytic fragment of IGFBP-3 therefore exhibits intrinsic inhibitory activity.