The transmembrane heparan sulfate proteoglycan syndecan-1 was identified from a human placenta cDNA library by the expression cloning method as a gene product that interacts with membrane type matrix metalloproteinase-1 (MT1-MMP). Co-expression of MT1-MMP with syndecan-1 in HEK293T cells promoted syndecan-1 shedding, and concentration of cell-associated syndecan-1 was reduced. Treatment of cells with MMP inhibitor BB-94 or tissue inhibitor of MMP (TIMP)-2 but not TIMP-1 interfered with the syndecan-1 shedding promoted by MT1-MMP expression. In contrast, syndecan-1 shedding induced by 12-O-tetradecanoylphorbol-13-acetate treatment was inhibited by BB-94 but not by either TIMP-1 or TIMP-2. Shedding of syndecan-1 was also induced by MT3-MMP but not by other MT-MMPs. Recombinant syndecan-1 core protein was shown to be cleaved by recombinant MT1-MMP or MT3-MMP preferentially at the Gly245-Leu246 peptide bond. HT1080 fibrosarcoma cells stably transfected with the syndecan-1 cDNA (HT1080/SDC), which express endogenous MT1-MMP, spontaneously shed syndecan-1. Migration of HT1080/SDC cells on collagen-coated dishes was significantly slower than that of control HT1080 cells. Treatment of HT1080/SDC cells with BB-94 or TIMP-2 induced accumulation of syndecan-1 on the cell surface, concomitant with further retardation of cell migration. Substitution of Gly245 of syndecan-1 with Leu significantly reduced shedding from HT1080/SDC cells and cell migration. These results suggest that the shedding of syndecan-1 promoted by MT1-MMP through the preferential cleavage of Gly245-Leu246 peptide bond stimulates cell migration.