The initiation of coagulation results from the activation of factor X by an enzyme complex (Xase) composed of the trypsin-like serine proteinase, factor VIIa, bound to tissue factor (TF) on phospholipid membranes. We have investigated the basis for the protein substrate specificity of Xase using TF reconstituted into vesicles of phosphatidylcholine, phosphatidylserine, or pure phosphatidylcholine. We show that occupation of the active site of VIIa within Xase by a reversible inhibitor or an alternate peptidyl substrate is sufficient to exclude substrate interactions at the active site but does not alter the affinity of Xase for factor X. This is evident as classical competitive inhibition of peptidyl substrate cleavage but as classical noncompetitive inhibition of factor X activation by active site-directed ligands. This implies that the productive recognition of factor X by Xase arises from a multistep reaction requiring an initial interaction at sites on the enzyme complex distinct from the active site (exosites), followed by active site interactions and bond cleavage. Exosite interactions determine protein substrate affinity, whereas the second binding step influences the maximum catalytic rate for the reaction. We also show that competitive inhibition can be achieved by interfering with exosite binding using factor X derivatives that are expected to have limited or abrogated interactions with the active site of VIIa within Xase. Thus, substrate interactions at exosites, sites removed from the active site of VIIa within the enzyme complex, determine affinity and binding specificity in the productive recognition of factor X by the VIIa-TF complex. This may represent a prevalent strategy through which distinctive protein substrate specificities are achieved by the homologous enzymes of coagulation.