Transforming growth factor-α (TGF-α) is a member of the EGF growth factor family. Both transmembrane TGF-α and the proteolytically released soluble TGF-α can bind to the EGF/TGF-α tyrosine kinase receptor (EGFR) and activate the EGFR-induced signaling pathways. We now demonstrate that transmembrane TGF-α physically interacts with CD9, a protein with four membrane spanning domains that is frequently coexpressed with TGF-α in carcinomas. This interaction was mediated through the extracellular domain of transmembrane TGF-α. CD9 expression strongly decreased the growth factor– and PMA- induced proteolytic conversions of transmembrane to soluble TGF-α and strongly enhanced the TGF- α–induced EGFR activation, presumably in conjunction with increased expression of transmembrane TGF-α. In juxtacrine assays, the CD9-induced EGFR hyperactivation by transmembrane TGF-α resulted in increased proliferation. In contrast, CD9 coexpression with transmembrane TGF-α decreased the autocrine growth stimulatory effect of TGF-α in epithelial cells. This decrease was associated with increased expression of the cdk inhibitor, p21CIP1. These data reveal that the association of CD9 with transmembrane TGF-α regulates ligand-induced activation of the EGFR, and results in altered cell proliferation.