The heparan sulfate-cleaving enzyme heparanase (HPSE) plays an important role in remodeling of the basement membrane and extracellular matrix during inflammation. Inducible HPSE enzymatic activity has been reported in leukocytes; however, little is known of the molecular mechanisms that regulate HPSE gene expression during inflammatory disease. In this study, HPSE expression and regulation in the T cell-mediated disease model, experimental autoimmune encephalomyelitis (EAE), were investigated. Expression analysis showed that HPSE mRNA is induced in rat CD4+ antigen-specific T lymphocytes upon activation and correlates with the encephalitogenicity of the cells. Examination of the kinetics and cell type-specific expression of HPSE throughout the progression of active EAE in rats, indicated that HPSE was highly expressed in CD4+ T cells infiltrating the central nervous system (CNS) during clinical disease. Little or no HPSE expression was observed in CD8+ T cells, macrophages, or astrocytes during disease progression. To investigate the mechanism of inducible HPSE gene regulation in T cells, studies were extended into human primary T cells. HPSE mRNA, protein, and enzymatic activity were induced upon activation. Functional analysis of the human HPSE promoter identified an EGR1 binding motif that contained high inducible activity and was transactivated by EGR1. Furthermore, the treatment of primary T lymphocytes with an EGR1 siRNA inhibited inducible HPSE mRNA expression. These data provide evidence to suggest that inducible HPSE expression in primary T lymphocytes is regulated at the transcriptional level by EGR1 and is important in facilitating CD4+ T cell infiltration into the CNS to promote EAE.