A major point of regulation of transforming growth factor-β (TGFβ) function is through control of activation of the latent TGF-β complex, which consists of the latency associated peptide (LAP) secreted in non-covalent association with mature TGF-β. Activation involves proteolysis, dissociation, or altered binding of LAP. However, the mechanism by which LAP confers latency to TGF-β is poorly understood. Previously, we identified a conserved sequence near the N terminus of LAP as a site of thrombospondin-1 (TSPl) binding to the latent complex. Now we show thai expression of the TGF-β1-latent complex deleted in the TSPl binding site (54LSIKL) of LAP (ΔLSKL LAP) results in secretion of LAP, but not of mature TGF-β1. ΔLSKL LAP also fails to bind soluble or immobilized TGF-β1. Consistent with an inability to bind the mature domain, ΔLSKL LAP is unable to confer latency to TGF-β, suggesting that the LSKL sequence is important, not only for TSP1 binding and activation, but also for binding to the mature domain. We identified the sequence 94RKPK in the receptor-binding region of mature TGF-β1 as the binding site for LAP. Peptides of the RKPK sequence bind LAP and inhibit LAP/TGF-β association. RKPK peptides also activate latent TGF-β, presumably by disrupting LAP-mature TGF-β interactions. These studies provide a molecular basis for both latency and activation by TSP1 through the LSKL sequence of LAP binding to the RKPK sequence of mature TGF-β.