The biological activity of IGF-I and -II is controlled by six binding proteins (IGFBPs), preventing the IGFs from interacting with the IGF receptor. Proteolytic cleavage of IGFBPs is one mechanism by which IGF can be released to bind the receptor. The IGFBPs are usually studied individually, although the presence of more than one of the IGFBPs in most tissues suggests a cooperative function. Thus, the IGFBPs are part of regulatory networks with proteolytic enzymes in one end and the IGF receptor in the other end. We have established a model system that allows analysis of the dynamics between IGF, IGFBP-4 and -5, the IGF receptor, and the proteolytic enzyme PAPP-A, which specifically cleaves both IGFBP-4 and -5. We demonstrate different mechanisms of IGF release from IGFBP-4 and -5: cooperative binding to IGF is observed for the proteolytic fragments of IGFBP-5, but not fragments of IGFBP-4. Furthermore, we find that PAPP-A-mediated IGF-dependent cleavage of IGFBP-4 is inhibited by IGFBP-5, which sequesters IGF from IGFBP-4, and that cleavage of both IGFBP-4 and -5 is required for the release of bioactive IGF. Finally, we show that cell surface-localized proteolysis of IGFBP-4 represents the final regulatory step of efficient IGF delivery to the receptor. Our data define a regulatory system in which molar ratios between the IGFBPs and IGF and between the different IGFBPs, sequential proteolytic cleavage of the IGFBPs, and surface association of the activating proteinase are key elements in the regulation of IGF receptor stimulation.