Prolidase, also known as Xaa-Pro dipeptidase or peptidase D (PEPD), is a ubiquitously expressed cytosolic enzyme that hydrolyzes dipeptides with proline or hydroxyproline at the carboxyl terminus. In this article, however, we demonstrate that PEPD directly binds to and activates epidermal growth factor receptor (EGFR), leading to stimulation of signaling proteins downstream of EGFR, and that such activity is neither cell-specific nor dependent on the enzymatic activity of PEPD. In line with the pro-survival and pro-proliferation activities of EGFR, PEPD stimulates DNA synthesis. We further show that PEPD activates EGFR only when it is present in the extracellular space, but that PEPD is released from injured cells and tissues and that such release appears to result in EGFR activation. PEPD differs from all known EGFR ligands in that it does not possess an epidermal growth factor (EGF) motif and is not synthesized as a transmembrane precursor, but PEPD binding to EGFR can be blocked by EGF. In conclusion, PEPD is a ligand of EGFR and presents a novel mechanism of EGFR activation.