Tartrate-resistant acid phosphatase (TRAP) is highly expressed in bone-resorbing osteoclasts and activated macrophages. It has been suggested that a redox-active iron in the binuclear iron center of TRAP could have the capacity to react with hydrogen peroxide to produce highly destructive reactive oxygen species (ROS). Here we show that TRAP can generate ROS in vitro and that cells over-expressing TRAP produce higher amounts of intracellular ROS than their parent cells. We further demonstrate that these ROS can be targeted to destroy collagen and other proteins. In resorbing osteoclasts, TRAP was found in transcytotic vesicles transporting matrix degradation products through the cell, suggesting that TRAP-facilitated fragmentation of endocytosed material takes place in a specific cellular compartment. These results suggest that bone matrix degradation occurs not only extracellularly in the resorption lacunae but also intracellularly in the transcytotic vesicles. We propose that proteins containing redox-active iron could represent a novel mechanism of physiological fragmentation of organic molecules. This mechanism could be important in tissue remodeling and as a defense mechanism of phagocytosing cells.