ABSTRACT: BMP-1/tolloid-like proteinases (BTPs) are major enzymes involved in extracellular matrix assembly and activation of bioactive molecules, both growth factors and anti-angiogenic molecules. Although the control of BTP activity by several enhancing molecules is well established, the possibility that regulation also occurs through endogenous inhibitors is still debated. Secreted frizzled-related proteins (sFRPs) have been studied as possible candidates, with highly contradictory results, after the demonstration that sizzled, a sFRP found in Xenopus and zebrafish, was a potent inhibitor of Xenopus and zebrafish tolloid-like proteases. In this study, we demonstrate that mammalian sFRP-1, -2, and -4 do not modify human BMP-1 activity on several of its known substrates including procollagen I, procollagen III, pN-collagen V, and prolysyl oxidase. In contrast, Xenopus sizzled appears as a tight binding inhibitor of human BMP-1, with a K(i) of 1.5 ± 0.5 nM, and is shown to strongly inhibit other human tolloid isoforms mTLD and mTLL-1. Because sizzled is the most potent inhibitor of human tolloid-like proteinases known to date, we have studied its mechanism of action in detail and shown that the frizzled domain of sizzled is both necessary and sufficient for inhibitory activity and that it acts directly on the catalytic domain of BMP-1. Residues in sizzled required for inhibition include Asp-92, which is shared by sFRP-1 and -2, and also Phe-94, Ser-43, and Glu-44, which are specific to sizzled, thereby providing a rational basis for the absence of inhibitory activity of human sFRPs.