Kidney injury molecule-1 (KIM-1), also known as T cell immunoglobulin and mucin domain 1 (TIM-1), is a transmembrane glycoprotein expressed on proximal tubule epithelia during acute kidney injury (AKI). Extracellular domain of KIM-1 undergoes spontaneous and activated ectodomain shedding into urine and blood via metalloproteases. Soluble KIM-1 (blood and urinary) is a reliable clinical biomarker of proximal tubular injury, but the biological significance of shedding remains unknown. The aim of this study was to identify the specific shedding enzyme and the proteolytic cleavage site of murine KIM-1, followed by the characterization of its functional relevance. In this regard, isoleucine (I) I202 was identified as the potential cleavage site. Mutation of isoleucine I202 to glutamine (I202Q) or alanine (I202A) significantly reduced both constitutive and induced KIM-1 shedding and ultimately efferocytosis. It was also uncovered that ADAM10 is the major sheddase that mediates the proteolytic cleavage of murine KIM-1. In addition, ADAM10-induced KIM-1 shedding was required for efficient phagocytic clearance of apoptotic cells. Importantly, the findings that the addition of exogenous shed KIM-1 rescued the phagocytic impairment suggest that shed KIM-1 is capable of modulating efferocytosis of apoptotic bodies and could represent a potential functional role of the soluble ectodomain KIM-1 during AKI.