Matrix metalloproteinase (MMP) functions modulate synapse formation and activity-dependent plasticity, with MMP dysfunction implicated in Fragile X syndrome (FXS), a disease caused by the loss of the RNA binding protein FMRP and characterized by neurological dysfunction and intellectual disability. Gene expression studies in Drosophila suggest that Mmps cooperate with the heparan sulfate proteoglycan (HSPG) glypican co-receptor Dally-like protein (Dlp) to restrict trans-synaptic Wnt signaling, and that synaptogenic defects in the fly model of FXS are alleviated by both Mmp inhibition and Dlp genetic reduction. Here, we used the Drosophila neuromuscular junction (NMJ) glutamatergic synapse to test activity-dependent Dlp and Mmp intersections in the context of FXS. We found that rapid, activity-dependent synaptic bouton formation was dependent upon secreted Mmp1. Acute neuronal stimulation reduced Mmp2 abundance, but increased that of both Mmp1 and Dlp as well as Dlp and Mmp1 co-localization at the synapse. Dlp function bidirectionally controlled Mmp1 abundance, localization and proteolytic activity around synapses. Dlp glycosaminoglycan (GAG) chains mediated this functional interaction with Mmp1. In the FXS fly model, activity-dependent increases in Mmp1 abundance and activity were lost but were restored by reducing the amount of synaptic Dlp. These data indicate that neuronal activity-induced, HSPG-dependent Mmp regulation drives activity-dependent synaptogenesis, and that this is impaired in FXS. Thus exploring this mechanism further may reveal therapeutic targets with potential to restore synaptogenesis in FXS patients.