The overexpression of urokinase (uPA), which plays a key role in tumour invasion and metastasis, is an established prognostic marker and potential therapeutic target. Plasminogen activator inhibitor type 2 (PAI-2), an efficient and specific inhibitor of uPA, has been shown to selectively deliver potent cytotoxins to tumour cells. However, a direct quantitative analysis of both the inhibition kinetics and subsequent fate of PAI-2 upon interaction with cell-surface uPA has not been previously undertaken. In this study, we analysed specific PAI-2 binding to receptor-bound uPA on human breast and prostate cancer cell lines to directly measure inhibition kinetics. Cell-surface uPA:PAI-2 complex formation, which is reflective of complete uPA inhibition, was found to be very efficient (inactivation constant [KI] = 60–80 pM, depending on cell line used) and rapid (inactivation rate constant [kinact] = 0.32–0.47 min−1 at 37°C, depending on cell line used). To directly quantify and visualise cellular internalisation and localisation, we developed a novel assay based on the use of PAI-2 labelled with Alexa488 fluorochrome and a polyclonal antibody to quench Alexa488 fluorescence. The efficient and rapid formation of uPA:PAI-2 complexes was thus shown to be associated with specific and rapid internalisation of PAI-2, which could be localised within endosomes and lysosomes. PAI-2 was subsequently degraded, presumably within lysosomes. This study is the first to provide definitive evidence for uPA/uPAR-mediated PAI-2 endocytosis.