The Eph family of receptor tyrosine kinases and their ephrin ligands are mediators of cell-cell communication. Cleavage of ephrin-A2 by the ADAM10 membrane metalloprotease enables contact repulsion between Eph- and ephrin-expressing cells. How ADAM10 interacts with ephrins in a regulated manner to cleave only Eph bound ephrin molecules remains unclear. The structure of ADAM10 disintegrin and cysteine-rich domains and the functional studies presented here define an essential substrate-recognition module for functional interaction of ADAM10 with the ephrin-A5/EphA3 complex. While ADAM10 constitutively associates with EphA3, the formation of a functional EphA3/ephrin-A5 complex creates a new molecular recognition motif for the ADAM10 cysteine-rich domain that positions the proteinase domain for effective ephrin-A5 cleavage. Surprisingly, the cleavage occurs in trans, with ADAM10 and its substrate being on the membranes of opposing cells. Our data suggest a simple mechanism for regulating ADAM10-mediated ephrin proteolysis, which ensures that only Eph bound ephrins are recognized and cleaved.