Membrane type 1 matrix metalloproteinase (MT1-MMP 255 and Ile 256 residues near the conserved methionine turn, a structural feature of the catalytic domain of all MMPs. Consistently, a recombinant 18-kDa fragment had no catalytic activity and did not bind TIMP-2. Thus, autocatalytic shedding evolved as a specific mechanism to terminate MT1-MMP activity on the cell surface by disrupting enzyme integrity at a vital structural site. In contrast, functional data suggest that the non-autocatalytic shedding generates soluble active MT1-MMP species capable of binding TIMP-2. These studies suggest that ectodomain shedding regulates the pericellular and extracellular activities of MT1-MMP through a delicate balance of active and inactive enzyme-soluble fragments.Release of the extracellular portion of type I transmembrane proteins, referred to as ectodomain shedding, has been established as a major regulatory mechanism to control the activity of a variety of membrane-bound proteins on the cell surface (1). Recent evidence suggests that ectodomain shedding is also characteristic of the membrane type matrix metalloproteinases (MT-MMPs), 1 a subfamily of membrane-anchored MMPs by means of a transmembrane domain or a glycosylphosphatidylinositol anchor (2, 3). The MT-MMPs are major mediators of proteolytic events on the cell surface, including turnover of extracellular matrix components (4, 5), cleavage of various surface adhesion receptors (6 -8), and initiation of zymogen activation cascades (9, 10). Uncontrolled MT-MMP activity contributes to abnormal development (11) and is a key determinant in cancer metastasis and tumor angiogenesis (12)(13)(14). To control the extent of pericellular activity, the MT-MMPs are inhibited by the tissue inhibitors of metalloproteinases (TIMPs), a family of natural protein MMP inhibitors. In addition, MT-MMPs have a unique regulatory mechanism in which the active enzyme undergoes a series of processing steps, either autocatalytic (15-17) or mediated by other proteases (18), that regulate the activity and nature of the enzyme species at the cell surface and at the pericellular space. Previous studies have shown that active MT1-MMP is autocatalytically processed on the cell surface to an inactive membrane-tethered ϳ44-kDa species lacking the entire catalytic domain (17). This processing is inhibited by TIMP-2, TIMP-4, and synthetic MMP inhibitors consistent with being an intermolecular autocatalytic event (19,20). Inhibition of MT1-MMP processing induces accumulation of the active enzyme on the cell surface, and, as a consequence, net MT1-MMP-dependent proteolysis is enhanced. Indeed, we have shown that, under certain conditions, inhibition of MT1-MMP autocatalysis by synthetic MMP inhibitors enhances pro-MMP-2 activation by MT1-MMP in the presence of TIMP-2 (20, 21). Thus, although the presence of inhibitors will stabilize MT1-MMP on the cell surface, the absence or reduced levels of inhibitors will facilitate autocatalysis. As a membrane-anchored protein, the autocatalytic processing of ac...