Plasmin (PLS) and urokinase-type plasminogen activator (UPA) are ubiquitous proteases that regulate the extracellular environment. Although they are secreted in inactive forms, they can activate each other through proteolytic cleavage. This mutual interplay creates the potential for complex dynamics, which we investigated using mathematical modeling and in vitro experiments. We constructed ordinary differential equations to model the conversion of precursor plasminogen into active PLS, and precursor urokinase (scUPA) into active urokinase (tcUPA). Although neither PLS nor UPA exhibits allosteric cooperativity, modeling showed that cooperativity occurred at the system level because of substrate competition. Computational simulations and bifurcation analysis predicted that the system would be bistable over a range of parameters for cooperativity and positive feedback. Cell-free experiments with recombinant proteins tested key predictions of the model. PLS activation in response to scUPA stimulus was found to be cooperative in vitro. Finally, bistability was demonstrated in vitro by the presence of two significantly different steady-state levels of PLS activation for the same levels of stimulus. We conclude that ultrasensitive, bistable activation of UPA-PLS is possible in the presence of substrate competition. An ultrasensitive threshold for activation of PLS and UPA would have ramifications for normal and disease processes, including angiogenesis, metastasis, wound healing, and fibrosis.