Degradation of fibrillar collagens is a central process in joint destruction in rheumatoid arthritis. Collagenase responsible for the collagenolysis has been immunolocalized on the extracellular matrix components at the cartilage/pannus junction in the rheumatoid joint, but very little is known about cellular source of the proteinase. In this paper monospecific antibodies against collagenase and tissue inhibitor of metalloproteinases (TIMP) were applied to rheumatoid and normal synovium to identify cells synthesizing and secreting the enzyme and its inhibitor. By treating the specimens with the monovalent ionophore, monensin, both collagenase and TIMP could be immunolocalized in hyperplastic synovial lining cells in rheumatoid synovium, but not in the cells of normal synovium. Dual immunolocalization studies demonstrated that the majority of the lining cells (approximately 64%) produce both collagenase and TIMP, while approximately 3% of the cells were positive only for collagenase, and 11% only for TIMP. Neither collagenase nor TIMP was immunolocalized on the extracellular matrix components in the synovia examined. These data suggest that synovial lining cells in rheumatoid arthritis secrete both collagenase and TIMP into the joint cavity. The role of collagenase in joint destruction in rheumatoid arthritis is discussed with reference to the regulation of the activity by TIMP.