Membrane anchoring of tissue factor (TF), the cell receptor for coagulation factor VIIa (VIIa), exemplifies an effective mechanism to localize proteolysis at the cell surface. A recombinant TF mutant (TF1-219), deleted of membrane spanning and intracellular domains, was used to evaluate the role of phospholipid interactions for assembly of substrate with the catalytic TF.VIIa complex. TF1-219 was secreted by cells rather than expressed as a cell membrane protein. Unlike free VIIa, TF1-219 as well as the TF1-219.VIIa complex demonstrated no stable association with phospholipid. In the absence of lipid, kinetic evaluation of substrate factor X cleavage by free VIIa, TF.VIIa, and TF1-219.VIIa suggests that the catalytic function of VIIa rather than substrate recognition is enhanced by complex formation. Furthermore, compared with free factor X, factor X on phospholipid was preferentially cleaved as a substrate by TF1-219.VIIa. TF-dependent initiation of the coagulation protease cascades thus involves an enhancement of the activation of factor X on the cell surface by a crucial role of the TF transmembrane domain to membrane anchor the reaction, by the TF extracellular domain to provide protein-protein interactions with VIIa to enhance the activity of the catalytic domain of VIIa, and the preferential presentation of factor X as a substrate when associated with phospholipid surfaces.