NKG2D is one of the most important activating receptors expressed by NK cells in terms of tumor cell recognition. NKG2D binds to different ligands, and triggers cytolysis and cytokine release by NK cells. Certain human NKG2D ligands can be shed and are thought to inhibit NK-mediated surveillance of cancer. Here we showed that a mouse NKG2D ligand, MULT1, is cleaved efficiently from cells, and accumulates in the serum of tumors and inflammatory diseases. Cleaved MULT1 binds to NKG2D with high affinity (~10 nM). Remarkably, an engineered form of the shed MULT1, when secreted by tumor cells lacking NKG2D ligands, causes tumor rejection, rather than inhibiting it. Rejection is mediated by NK cells and in some cases T cells. Provision of recombinant MULT1 along with B16 melanoma cells resulted in induction of NK function ex vivo and tumor rejection in vivo. We propose a model in which expression of NKG2D ligands by non-tumor cells, persistently stimulate NK cells, resulting in desensitization of the NK cells; interruption of the interaction by soluble MULT1 restores NK cell functionality, causing tumor elimination. Consistent with this model, Rag2-/- mice which also lack NKG2D show higher NK activity than Rag2-/- mice, resulting in better B16 tumor rejection. Our study represents the first instance of NKG2D ligand shedding in the mouse, and provides the first evidence that such ligands are immunostimulatory, reversing the conventional understanding of soluble NKG2D ligands.