Efficient clearance of apoptotic cells (efferocytosis) prevents inflammation and permits repair following tissue injury. Kidney injury molecule-1 (KIM-1) is a receptor for phosphatidylserine, an "eat me" signal exposed on the surface of apoptotic cells that marks them for phagocytic clearance. KIM-1 is upregulated on proximal tubule epithelial cells (PTECs) during ischemic acute kidney injury (AKI), enabling efferocytosis by surviving PTECs. KIM-1 is spontaneously cleaved at its ectodomain region to generate a soluble fragment that serves a sensitive and specific biomarker for AKI, but the biological relevance of KIM-1 shedding is unknown. Here, we sought to determine how KIM-1 shedding might regulate efferocytosis. Using cells that endogenously and exogenously express KIM-1 we found that hydrogen peroxide-mediated oxidative injury or phorbol-12-myristate-13-acetate (PMA) treatment accelerated KIM-1 shedding in a dose-dependent manner. KIM-1 shedding was also accelerated when apoptotic cells were added. Accelerated shedding or the presence of excess soluble KIM-1 in the extracellular milieu significantly inhibited efferocytosis. We identified that tumor necrosis factor alpha-converting enzyme (TACE or ADAM17) mediates both the spontaneous and PMA-accelerated shedding of KIM-1. While accelerated shedding inhibited efferocytosis, we found that spontaneous KIM-1 cleavage does not affect the phagocytic efficiency of PTECs. Our results suggest that KIM-1 shedding is accelerated by worsening cellular injury and excess soluble KIM-1 competitively inhibits efferocytosis. These findings may be important in AKI when there is severe cellular injury.