The extracellular protease plasmin cleaves mouse MCP1 (monocyte chemoattractant protein 1) at lysine 104, releasing a 50-amino acid C-terminal domain. The cleavage event increases the chemotactic activity of MCP1 and, by doing so, promotes the progression of excitotoxic injury in the central nervous system in pathological settings. The mechanism through which the cleavage event enhances MCP1-mediated chemoattraction is unknown; to investigate it, we use wild-type and mutant forms of recombinant MCP1. Full-length MCP1 (FL-MCP1) is secreted by cells as a dimer or multimer. We show that a mutant truncated at the C terminus, K104Stop-MCP1, does not dimerize, revealing that the C terminus mediates the interaction. MCP1 interacts with the monocyte/microglia receptor CCR2. The interaction is critical to the function of MCP1 because CCR2 -/- microglia do not undergo chemotaxis in response to MCP1 stimulation. We show that stimulation of microglia with FL-MCP1 or K104Stop-MCP1 triggers CCR2 internalization, whereas a mutant form unable to be cleaved at lysine 104 (K104A-MCP1) is relatively ineffective in this assay, suggesting that the C-terminal region interferes with the MCP1-CCR2 interaction. Moreover, FL-MCP1 and K104Stop-MCP1 stimulation leads to activation of Rac1, a small GTPase involved in cell migration. Conversely, MCP1-stimulated microglial migration is blocked by the Rac1 inhibitor, NSC23766, demonstrating the requirement for Rac1 effector pathways in this response. Taken together, we propose a model for MCP1 localization, activation, and function based on the initial presence and then removal of its C terminus, coupled with a requisite downstream signaling pathway from CCR2 stimulation to Rac1 activation.