The TAT protein transduction domain (PTD) has been used to deliver a wide variety of biologically active cargo for the treatment of multiple preclinical disease models, including cancer and stroke. However, the mechanism of transduction remains unknown. Because of the TAT PTD's strong cell-surface binding, early assumptions regarding cellular uptake suggested a direct penetration mechanism across the lipid bilayer by a temperature- and energy-independent process. Here we show, using a transducible TAT-Cre recombinase reporter assay on live cells, that after an initial ionic cell-surface interaction, TAT-fusion proteins are rapidly internalized by lipid raft-dependent macropinocytosis. Transduction was independent of interleukin-2 receptor/raft-, caveolar- and clathrin-mediated endocytosis and phagocytosis. Using this information, we developed a transducible, pH-sensitive, fusogenic dTAT-HA2 peptide that markedly enhanced TAT-Cre escape from macropinosomes. Taken together, these observations provide a scientific basis for the development of new, biologically active, transducible therapeutic molecules.