Several pathophysiological conditions, including nephrotic syndrome, are characterized by increased renal activity of the epithelial Na⁺ channel (ENaC). We recently identified plasmin in nephrotic urine as a stimulator of ENaC activity, and undertook this study to investigate the mechanism by which plasmin stimulates ENaC activity. Cy3-labeled plasmin was found to bind to the surface of the mouse cortical collecting duct cell line, M-1. Binding depended on a glycosylphosphatidylinositol (GPI)-anchored protein. Biotin-label transfer showed that plasmin interacted with the GPI-anchored protein prostasin on M-1 cells and that plasmin cleaved prostasin. Prostasin activates ENaC by cleavage of the -subunit, which releases an inhibitory peptide from the extracellular domain. Removal of GPI-anchored proteins from the M-1 cells with phosphatidylinositol-specific phospholipase C (PI-PLC) inhibited plasmin-stimulated ENaC current in monolayers of M-1 cells at low plasmin concentration (1-4 µg/ml). At a high plasmin concentration of 30 µg/ml, there was no difference between cell layers treated with or without PI-PLC. Knockdown of prostasin attenuated binding of plasmin to M1 cells and blocked plasmin-stimulated ENaC current in single M-1 cells as measured by whole-cell patch clamp. In M-1 cells expressing heterologous FLAG-tagged prostasin, ENaC and prostasin were co-localized. A monoclonal antibody directed against the inhibitory peptide of ENaC produced specific immunofluorescence labeling of M-1 cells. Pretreatment with plasmin abolished labeling of M-1 cells in a prostasin-dependent way. We conclude that, at low concentrations, plasmin interacts with GPI-anchored prostasin, which leads to cleavage of the -subunit and activation of ENaC, while at higher concentrations, plasmin directly activates ENaC.