The membrane‐type matrix metalloproteinases (MT‐MMPs) play an important role in degrading the extracellular matrix (ECM) and facilitating protease‐dependent tumor progression and invasion. Here, we report that unlike MT1‐MMP, MT3‐MMP was down‐regulated in esophageal squamous cell carcinoma (ESCC) as detected by real‐time PCR (qPCR), Western blot analysis, and immunohistochemistry (IHC). Down‐regulation of MT3‐MMP was observed at protein level in 66.3% of ESCC specimens (by IHC, n = 86) for routine pathologic diagnosis, as well as at mRNA level in 63.3% of surgically resected ESCC tumors paired with surrounding nontumor tissues (by qPCR, n = 30). Notably, MT3‐MMP down‐regulation significantly correlated with lymph node metastasis and poor overall survival of patients with ESCC (median 5‐year survival = 50.69 vs. 30.77 months for patients with MT3‐MMP‐negative and ‐positive ESCC, respectively). Mechanistically, MT3‐MMP negatively regulated proliferation, colony formation, and migration of ESCC cells, in association with cell cycle arrest at G1, due to up‐regulation of p21Cip1 and p27Kip1. Together, as a tumor suppressor in ESCC, MT3‐MMP down‐regulation represents an unfavorable factor for prognosis of patients with ESCC.