Tumor necrosis factor (TNF) is a pleiotropic mediator of inflammatory responses. A cysteine-rich, highly glycosylated 30-kD TNF-binding protein (TNF-BP) purified from urine may have a role in regulation because it protects in vitro against the biological effects of TNF. The cytotoxic effect of TNF on the fibrosarcoma cell line WEHI 164 was inhibited by 50% at a 10-fold excess of TNF-BP. The binding of TNF to the receptor was partially reversed after the addition of TNF-BP. Results from biosynthetic labeling of cells with 35S-cysteine followed by immunoprecipitation with anti-TNF-BP indicated that TNF-BP is formed and released at the cell surface by cleavage because no corresponding cellular polypeptide was observed. A cellular 60-kD polypeptide, which was immunoprecipitated with anti-TNF-BP, may correspond to the transmembrane TNF-receptor molecule and be the precursor of TNF-BP. Thus, TNF-BP appears to be a soluble form of a transmembrane TNF-receptor. Moreover our results demonstrate that the production of TNF-BP is increased when the TNF receptor is downregulated in cells by treatment with TNF or by activation of protein kinase C with phorbol esters. TNF-BP may be an important agent that blocks harmful effects of TNF, and, therefore, useful in clinical applications.