In our study, we characterized the substrate recognition properties of membrane type-1 matrix metalloproteinase (MT1-MMP; also known as MMP-14), a key enzyme in tumor cell invasion and metastasis. A panel of optimal peptide substrates for MT1-MMP was identified using substrate phage display. The substrates can be segregated into four groups based on their degree of selectivity for MT1-MMP. Substrates with poor selectivity for MT1-MMP are comprised predominately of the Pro-X-X- downward arrow-X(Hy) motif that is recognized by a number of MMPs. Highly selective substrates lack the characteristic Pro at the P(3) position; instead they contain an Arg at the P(4) position. This P(4) Arg is essential for efficient hydrolysis and for selectivity for MT1-MMP. Molecular modeling indicates that the selective substrates adopt a linear conformation that extends along the entire catalytic pocket of MT1-MMP, whereas non-selective substrates are kinked at the conserved P(3) Pro residue. Importantly, the selective substrates can be made non-selective by insertion of a proline kink at P(3), without significantly reducing overall k(cat)/K(m) values. Altogether the study provides a structural basis for selective and non-selective substrate recognition by MT1-MMP. The findings in this report are likely to explain several aspects of MT1-MMP biology.