Photoreceptor cyclic nucleotide-gated (CNG) channels are the principal ion channels responsible for transduction of the light-induced change in cGMP concentration into an electrical signal. The ligand sensitivity of photoreceptor CNG channels is subject to regulation by intracellular signaling effectors, including calcium-calmodulin, tyrosine kinases and phosphoinositides. Little is known, however, about regulation of channel activity by modification to extracellular regions of CNG channel subunits. Extracellular proteases MMP9 and -2 are present in the interphotoreceptor matrix adjacent to photoreceptor outer segments. Given that MMPs have been implicated in retinal dysfunction and degeneration, we hypothesized that MMP activity may alter the functional properties of photoreceptor CNG channels. For heterologously expressed rod and cone CNG channels, extracellular exposure to MMPs dramatically increased the apparent affinity for cGMP and the efficacy of cAMP. These changes to ligand sensitivity were not prevented by destabilization of the actin cytoskeleton or by disruption of integrin mediated cell adhesion, but could be attenuated by inhibition of MMP catalytic activity. MMP-mediated gating changes exhibited saturable kinetic properties consistent with enzymatic processing of the CNG channels. In addition, exposure to MMPs decreased the abundance of full-length expressed CNGA3 subunits, with a concomitant increase in putative degradation products. Similar gating effects and apparent proteolysis were observed also for native rod photoreceptor CNG channels. Furthermore, constitutive apparent proteolysis of retinal CNGA1 and retinal MMP9 levels were both elevated in aged mice compared with young mice. Together, these results provide evidence that MMP-mediated proteolysis can regulate the ligand sensitivity of CNG channels.