Factor VIIIa consists of subunits designated A1, A2, and A3-C1-C2. The limited cofactor activity observed with the isolated A2 subunit is markedly enhanced by the A1 subunit. A truncated A1 (A1(336)) was previously shown to possess similar affinity for A2 and retain approximately 60% of its A2 stimulatory activity. We now identify a second site in A1 at Lys(36) that is cleaved by factor Xa. A1 truncated at both cleavage sites (A1(37-336)) showed little if any affinity for A2 (K(d)>2 microm), whereas factor VIIIa reconstituted with A2 plus A1(37-336)/A3-C1-C2 dimer demonstrated significant cofactor activity ( approximately 30% that of factor VIIIa reconstituted with native A1) in a factor Xa generation assay. These affinity values were consistent with values obtained by fluorescence energy transfer using acrylodan-labeled A2 and fluorescein-labeled A1. In contrast, factor VIIIa reconstituted with A1(37-336) showed little activity in a one-stage clotting assay. This resulted in part from a 5-fold increase in K(m) for factor X when A1 was cleaved at Arg(336). These findings suggest that both A1 termini are necessary for functional interaction of A1 with A2. Furthermore, the C terminus of A1 contributes to the K(m) for factor X binding to factor Xase, and this parameter is critical for activity assessed in plasma-based assays.