Membrane-type matrix metalloproteinase 1 (MT1-MMP) is a transmembrane zinc-endopeptidase that breaks down extracellular matrix components, including several collagens, during tissue development and physiological remodeling. MT1-MMP-deficient mice (MT1-MMP−/−) feature severe defects in connective tissues, such as impaired growth, osteopenia, fibrosis, and conspicuous loss of molar tooth eruption and root formation. In order to define the functions of MT1-MMP during root formation and tooth eruption, we analyzed the development of teeth and surrounding tissues in the absence of MT1-MMP. In situ hybridization showed that MT1-MMP was widely expressed in cells associated with teeth and surrounding connective tissues during development. Multiple defects in dentoalveolar tissues were associated with loss of MT1-MMP. Root formation was inhibited by defective structure and function of Hertwig's epithelial root sheath (HERS). However, no defect was found in creation of the eruption pathway, suggesting that tooth eruption was hampered by lack of alveolar bone modeling/remodeling coincident with reduced periodontal ligament (PDL) formation and integration with the alveolar bone. Additionally, we identified a significant defect in dentin formation and mineralization associated with the loss of MT1-MMP. To segregate these multiple defects and trace their cellular origin, conditional ablation of MT1-MMP was performed in epithelia and mesenchyme. Mice featuring selective loss of MT1-MMP activity in the epithelium were indistinguishable from wild type mice, and importantly, featured a normal HERS structure and molar eruption. In contrast, selective knock-out of MT1-MMP in Osterix-expressing mesenchymal cells, including osteoblasts and odontoblasts, recapitulated major defects from the global knock-out including altered HERS structure, short roots, defective dentin formation and mineralization, and reduced alveolar bone formation, although molars were able to erupt. These data indicate that MT1-MMP activity in the dental mesenchyme, and not in epithelial-derived HERS, is essential for proper tooth root formation and eruption. In summary, our studies point to an indispensable role for MT1-MMP-mediated matrix remodeling in tooth eruption through effects on bone formation, soft tissue remodeling and organization of the follicle/PDL region.