The 50 amino acid form of TGF-alpha is cleaved from a conserved integral membrane glycoprotein by a protease that, in many tumor cells, appears to be limiting. To test whether the membrane-bound precursor has biological activity in the absence of processing, we introduced amino acid substitutions at the proteolytic cleavage sites. BHK cells transfected with expression vectors containing these altered sequences do not secrete detectable levels of mature TGF-alpha into the medium, but express high levels of proTGF-alpha at the cell surface. Coincubation of these BHK cells with A431 cells demonstrates that membrane-bound proTGF-alpha may bind to EGF receptors on the surface of contiguous cells, induce receptor autophosphorylation, and thereby produce a rapid rise in A431 intracellular calcium levels. Thus, proTGF-alpha can be biologically active in the absence of processing, a fact that may have implications for the integral membrane precursors of related growth factors.