Collagen XII is a regulator of corneal stroma structure and function. The current study examined the role of collagen XII in regulating corneal stromal transforming growth factor (TGF)-β activation and latency. Specifically, with the use of conventional collagen XII null mouse model, the role of collagen XII in the regulation of TGF-β latency and activity in vivo was investigated. Functional quantification of latent TGF-β in stromal matrix was performed by using transformed mink lung reporter cells that produce luciferase as a function of active TGF-β. Col12a1 knockdown with shRNA was used to test the role of collagen XII in TGF-β activation. Col12a1-/- hypertrophic stromata were observed with keratocyte hyperplasia. Increased collagen fibril forward signal was found by second harmonic generation microscopy in the absence of collagen XII. Collagen XII regulated mRNA synthesis of Serpine1, Col1a1, and Col5a1 and deposition of collagens in the extracellular matrix. A functional plasminogen activator inhibitor luciferase assay showed that collagen XII is necessary for latent TGF-β storage in the extracellular matrix and that collagen XII down-regulates active TGF-β. Collagen XII dictates stromal structure and function by regulating TGF-β activity. A hypertrophic phenotype in Col12a1-/- corneal tissue can be explained by abnormal up-regulation of TGF-β activation and decreased latent storage.