The metalloproteinase BMP-1 (bone morphogenetic protein-1) plays a major role in the control of extracellular matrix (ECM) assembly and growth factor activation. Most of the growth factors activated by BMP-1 are members of the TGF-β superfamily known to regulate multiple biological processes including embryonic development, wound healing, inflammation and tumor progression. In this study, we used an iTRAQ (isobaric tags for relative and absolute quantification)-based quantitative proteomic approach to reveal the release of proteolytic fragments from the cell surface or the ECM by BMP-1. Thirty-eight extracellular proteins were found in significantly higher or lower amounts in the conditioned medium of HT1080 cells overexpressing BMP-1 and thus, could be considered as candidate substrates. Strikingly, three of these new candidates (betaglycan, CD109 and neuropilin-1) were TGF-β co-receptors, also acting as antagonists when released from the cell surface, and were chosen for further substrate validation. Betaglycan and CD109 proved to be directly cleaved by BMP-1 and the corresponding cleavage sites were extensively characterized using a new mass spectrometry approach. Furthermore, we could show that the ability of betaglycan and CD109 to interact with TGF-β was altered after cleavage by BMP-1, leading to increased and prolonged SMAD2 phosphorylation in BMP-1-overexpressing cells. Betaglycan processing was also observed in primary corneal keratocytes, indicating a general and novel mechanism by which BMP-1 directly affects signaling by controlling TGF-β co-receptor activity. The proteomic data have been submitted to ProteomeXchange with the identifier PXD000786 and doi: 10.6019/PXD000786 .