It has been proposed that the cell-mediated activation of progelatinase A requires binding of the C-terminal domain of the proenzyme to a membrane-associated complex of the membrane type matrix metalloproteinase MT1-MMP and TIMP-2. Subsequent sequential proteolysis of the propeptide by MT1-MMP and gelatinase A is thought to generate the active form of gelatinase A. We have prepared the proform of the catalytic domain of the MT1-MMP and demonstrated that this may be activated in vitro by trypsin proteolysis to yield a functional proteinase capable of cleaving typical metalloproteinase peptide substrates, gelatin and casein. The active catalytic domain of MT1-MMP was also shown to activate progelatinase A to a fully active form. Using the inactive mutant pro-E375A gelatinase A, we dissected the propeptide processing events that occur. MT1-MMP cleaves the propeptide at the sequence Asn37-Leu38 only. Further cleavage of the mutant enzyme propeptide at Asn80-Tyr81, equivalent to that of the active wild type gelatinase A, could only be effected by addition of gelatinase A to the system. TIMP-1 was essentially unable to prevent MT1-MMP processing of wild type or E375A progelatinase A, whereas TIMP-2 and TIMP-3 were good inhibitors of these events. Analysis of the rate of binding of TIMPs to the catalytic domain of MT1-MMP using kinetic methods showed that TIMP-1 is an extremely poor inhibitor of MT1-MMP. In comparison, TIMP-2 and TIMP-3 are excellent inhibitors, binding more rapidly to the catalytic domain of MT1-MMP than to the catalytic domain of gelatinase A. These data demonstrate the basic mechanism of MT1-MMP action on progelatinase A and the reason for the lack of inhibition by TIMP-1 previously demonstrated in cell-based activation studies.