The influx of inflammatory cells to sites of injury is largely directed by signals from the epithelium, but how these cells form chemotactic gradients is not known. In matrilysin null mice, neutrophils remained confined in the interstitium of injured lungs and did not advance into the alveolar space. Impaired transepithelial migration was accompanied by a lack of both shed syndecan-1, a heparan sulfate proteoglycan, and KC, a CXC chemokine, in the alveolar fluid. KC was bound to shed syndecan-1, and it was not detected in the lavage of syndecan-1 null mice. In vitro, matrilysin cleaved syndecan-1 from the surface of cells. Thus, matrilysin-mediated shedding of syndecan-1/KC complexes from the mucosal surface directs and confines neutrophil influx to sites of injury.