Protein C inhibitor (PCI), a plasma serine protease inhibitor, inhibits several proteases including the anticoagulant enzyme, activated protein C (APC), and the coagulation enzymes, thrombin and factor Xa. Previous studies have shown that thrombin and APC are inhibited at similar rates by PCI and that heparin accelerates PCI inhibition of both enzymes more than 20-fold. We now demonstrate that the thrombin-binding proteoglycan, rabbit thrombomodulin, accelerates inhibition of thrombin by PCI approximately equal to 140-fold (k2 = 2.4 x 10(6) in the presence of TM compared to 1.7 x 10(4) M-1 S-1 in the absence of TM). Most of this effect is mediated by protein-protein interactions since the active fragment of TM composed of epidermal growth factor-like domains 4-6 (TM 4-6) accelerates inhibition by PCI approximately equal to 59-fold (k2 = 1.0 x 10(6) M-1 S-1). The mechanism by which TM alters reactivity with PCI appears to reside in part in an alteration of the S2 specificity pocket. Replacing Phe353 with Pro at the P2 position in the reactive loop of PCI yields a mutant that inhibits thrombin better in the absence of TM (k2 = 6.3 x 10(5) M-1 S-1), but TM 4-6 enhances inhibition by this mutant approximately equal to 9-fold (k2 = 5.8 x 10(6) M-1 S-1) indicating that TM alleviates the inhibitory effect of the less favored Phe residue. These results indicate that PCI is a potent inhibitor of the protein C anticoagulant pathway at the levels of both zymogen activation and enzyme inhibition.