The chemokine CXCL12 or stromal cell-derived factor 1/SDF-1 attracts hematopoietic progenitor cells and mature leukocytes through the G protein-coupled CXC chemokine receptor 4 (CXCR4). In addition, it interacts with atypical chemokine receptor 3 (ACKR3 or CXCR7) and glycosaminoglycans. CXCL12 activity is regulated through posttranslational cleavage by CD26/dipeptidyl peptidase 4 that removes two NH2-terminal amino acids. CD26-truncated CXCL12 does not induce calcium signaling or chemotaxis of mononuclear cells. CXCL12(3–68) was chemically synthesized de novo for detailed biological characterization. Compared to unmodified CXCL12, CXCL12(3–68) was no longer able to signal through CXCR4 via inositol trisphosphate (IP3), Akt or extracellular signal-regulated kinases 1 and 2 (ERK1/2). Interestingly, the recruitment of β-arrestin 2 to the cell membrane via CXCR4 by CXCL12(3–68) was abolished, whereas a weakened but significant β-arrestin recruitment remained via ACKR3. CXCL12-induced endothelial cell migration and signal transduction was completely abrogated by CD26. Intact CXCL12 hardly induced lymphocyte migration upon intra-articular injection in mice. In contrast, oral treatment of mice with the CD26 inhibitor sitagliptin reduced CD26 activity and CXCL12 cleavage in blood plasma. The potential of CXCL12 to induce intra-articular lymphocyte infiltration was significantly increased in sitagliptin-treated mice and CXCL12(3–68) failed to induce migration under both CD26-inhibiting and non-inhibiting conditions. In conclusion, CD26-cleavage skews CXCL12 towards β-arrestin dependent recruitment through ACKR3 and destroys the CXCR4-mediated lymphocyte chemoattractant properties of CXCL12 in vivo. Hence, pharmacological CD26-blockade in tissues may enhance CXCL12-induced inflammation.