Tightly controlled proteolytic degradation of the extracellular matrix by invading microvascular endothelial cells is believed to be a necessary component of the angiogenic process. We have previously demonstrated the induction of plasminogen activators (PAs) in bovine microvascular endothelial (BME) cells by three agents that induce angiogenesis in vitro: basic FGF (bFGF), PMA, and sodium orthovanadate. Surprisingly, we find that these agents also induce plasminogen activator inhibitor-1 (PAI-1) activity and mRNA in BME cells. We also find that transforming growth factor-beta 1 (TGF-beta 1), which in vitro modulates a number of endothelial cell functions relevant to angiogenesis, also increases both PAI-1 and urokinase-type PA (u-PA) mRNA. Thus, production of both proteases and protease inhibitors is increased by angiogenic agents and TGF-beta 1. However, the kinetics and amplitude of PAI-1 and u-PA mRNA induction by these agents are strikingly different. We have used the ratio of u-PA:PAI-1 mRNA levels as an indicator of proteolytic balance. This ratio is tilted towards enhanced proteolysis in response to bFGF, towards antiproteolysis in response to TGF-beta 1, and is similar to that in untreated cultures when the two agents are added simultaneously. Using an in vitro angiogenesis assay in three-dimensional fibrin gels, we find that TGF-beta 1 inhibits the bFGF-induced formation of tube-like structures, resulting in the formation of solid endothelial cell cords within the superficial parts of the gel. These results suggest that a net positive proteolytic balance is required for capillary lumen formation. A novel perspective is provided on the relationship between extracellular matrix invasion, lumen formation, and net proteolytic balance, thereby reflecting the interplay between angiogenesis-modulating cytokines such as bFGF and TGF-beta 1.