Kaposi's sarcoma-associated herpesvirus (KSHV/HHV-8) has been linked to Kaposi's sarcoma, primary effusion lymphoma, and multicentric Castleman's disease. In addition to endothelial cells and B lymphocytes, KSHV also has been shown to infect epithelial cells and keratinocytes. The transmembrane glycoprotein K1, encoded by the first open reading frame of KSHV, is a signaling protein capable of eliciting B-cell activation. We show that KSHV K1 can induce expression and secretion of vascular endothelial growth factor (VEGF) in epithelial and endothelial cells. Up-regulation of VEGF was mediated at the transcriptional level because expression of K1 resulted in VEGF promoter activation. We also show that K1 induces expression of matrix metalloproteinase-9 (MMP-9) in endothelial cells. Additional analyses with K1 mutant proteins revealed that the SH2 binding motifs present in the K1 cytoplasmic tail are necessary for VEGF secretion and MMP-9 induction. These results indicate that K1 signaling may contribute to KSHV-associated pathogenesis through a paracrine mechanism by promoting the secretion of VEGF and MMP-9 into the surrounding matrix.