Coagulation factor XIIIa (FXIIIa) is a transglutaminase that covalently cross-links fibrin and other proteins to fibrin to stabilize blood clots and reduce blood loss. A clear mechanism to describe the physiological inactivation of FXIIIa has been elusive. Here, we show that plasmin can cleave FXIIIa in purified systems and in blood. Whereas zymogen FXIII was not readily cleaved by plasmin, FXIIIa was rapidly cleaved and inactivated by plasmin in solution (catalytic efficiency = 8.3 × 10³ M⁻¹s⁻¹). The primary cleavage site identified by mass spectrometry was between K468 and Q469. Both plasma- and platelet-derived FXIIIa were susceptible to plasmin-mediated degradation. Inactivation of FXIIIa occurred during clot lysis and was enhanced both in plasma deficient in fibrinogen and in plasma treated with therapeutic levels of tissue plasminogen activator. These results indicate that FXIIIa activity can be modulated by fibrinolytic enzymes, and suggest that changes in fibrinolytic activity may influence cross-linking of blood proteins.