Temperature and salt dependence studies of thrombin interaction with thrombomodulin, with and without chondroitin sulfate, and two fragments containing the EGF-like domains 4-5 and 4-5-6 reveal the energetic signatures and the mechanism of recognition of this physiologically important cofactor. Binding of thrombomodulin is affected drastically by the particular salt present in solution and is positively linked to Na+ binding to thrombin and the conversion of the enzyme from the slow to the fast form, but is opposed by Cl- binding to the fibrinogen recognition site and especially to the heparin binding site. Binding of thrombomodulin has an unusually large salt dependence (Γ(salt) = -4.8) contributed mostly by the polyelectrolyte-like nature of the chondroitin sulfate moiety that binds to the heparin binding site and increases the affinity of the cofactor by almost 10-fold. On the other hand, the chondroitin sulfate has no effect on the AC(p) of binding, which is determined predominantly by contacts made by the EGF-like domains 5 and 6 with the fibrinogen recognition site. The modest heat capacity change (-0.2 kcal mol-1 K-1) observed when thrombomodulin binds to the fast form suggests a rigid-body association of the cofactor with the enzyme. In the slow form, however, the heat capacity change is significantly more pronounced (-0.5 kcal mol-1 K-1) and signals the presence of a conformational transition of the enzyme linked to binding of the cofactor that mimics the slow→fast conversion. These results demonstrate that recognition of thrombomodulin by thrombin is steered electrostatically by the highly charged regions of the fibrinogen recognition site and the heparin binding site, to which the chondroitin sulfate moiety binds and enhances the affinity of the interaction. The recognition event also involves conformational changes of the enzyme in the slow form mediated by binding of the EGF-like domains 5-6 to the fibrinogen recognition site. Consistent with this model, binding of thrombomodulin to the fast form has only a small effect on the hydrolysis of nine chromogenic substrates carrying substitutions at P1, P2, and P3 aimed at probing the environment of the specificity sites S1, S2, and S3 of the enzyme. Binding to the slow form, on the other hand, enhances the specificity toward all substrates up to 15-fold. For substrates carrying a Gly at P2, binding of thrombomodulin changes the relative specificity of the slow and fast forms and makes the slow form more specific. Interestingly, these effects are not specific of thrombomodulin and depend solely on binding to the fibrinogen recognition site of the enzyme. In fact, they are also observed with the hirudin C-terminal fragment 55-65. The characterization of the mechanism of thrombin-thrombomodulin interaction and the effects of the cofactor on the hydrolysis of chromogenic substrates probing the interior of the catalytic pocket bear on the thrombomodulin-induced enhancement of protein C cleavage by thrombin. We propose that this enhancement is due predominantly to an effect of thrombomodulin on the bound protein C in the ternary complex. Therefore, thrombomodulin would carry out its physiological function by making protein C a better substrate for thrombin, rather than making thrombin a better enzyme for protein C.