The processing mechanism and gelatinolytic activity of the membrane-type matrix metalloproteinase 1 (MT-MMP-1) were examined by expressing in COS-1 cells a deletion mutant of MT-MMP-1 lacking the trans-membrane domain (delta MT1) and its site-directed mutant with a furin-resistant sequence in the propeptide domain (mutant delta MT1). delta MT1, but not mutant delta MT1, was processed to an active form and exhibited gelatinolytic activity as seen using gelatin zymography. delta MT1 isolated in a complex form with tissue inhibitor of metalloproteinases 2 (TIMP-2) from the stable transfectants demonstrated the NH2-terminal sequence of Ala113-IIe-Gln-Leu, indicating cleavage at one amino acid down-stream from the furin recognition sequence. The delta MT1/TIMP-2 complex formed a ternary complex with proMMP-2 through the COOH termini of TIMP-2 and proMMP-2. A human breast carcinoma cell line (MDA-MB-231 cells) also secreted MT-MMP-1 into culture media, which was purified in a complex form with TIMP-2 and showed gelatinolytic activity as seen using zymography. These results demonstrate for the first time that MT-MMP-1 is a gelatinolytic enzyme and secreted from cells in a complex with TIMP-2, which can form a ternary complex of MT-MMP-1/TIMP2/proMMP-2.