The success of gene therapy in the ocular environment is partly due to the presence of hyaluronan in vitreous. Here we explore the mechanism of hyaluronan-mediated enhancement of adenoviral vector transgene expression. Introduction of hyaluronan receptor CD44 into CD44-negative cells followed by transduction in the presence of vitreous with an adenoviral vector containing an IL-12-coding transgene increases IL-12 secretion. We demonstrate that sequential CD44 proteolysis is responsible for hyaluronan-mediated enhancement. Metalloproteinase or γ-secretase inhibitors decrease adenoviral-mediated transgene expression. Deletion of these proteolytic sites in CD44 also inhibits transgene expression. Expression of CD44 with a mutation to prevent phosphorylation of serine 325 inhibits the response to vitreous. Expression of the CD44 intracellular domain enhances transgene expression in the absence of vitreous. CD44-mediated enhancement of gene expression was observed with vectors using different promoters and appears because of an increase in mRNA production, not because of an increase in vector transduction as determined by quantitative RT-PCR and quantitative PCR, respectively. These data fit a model where the interaction of hyaluronan in vitreous and CD44 modulates transgene expression by initiating CD44 proteolysis and release of the cytoplasmic domain, resulting in increased transgene transcription.