Paclitaxel induces peripheral neuropathy as a side effect of cancer treatment. The underlying causes are unclear, but epidermal, unmyelinated axons have been shown to be the first to degenerate. We previously utilized an in vivo zebrafish model to show that the epidermal matrix-metalloproteinase 13 (MMP-13) induces degeneration of unmyelinated axons, whereas pharmacological inhibition of MMP-13 prevented axon degeneration. However, the precise functions by which MMP-13 is regulated and affects axons remained elusive. In this study, we assessed mitochondrial damage and reactive oxygen species (ROS) formation as possible inducers of MMP-13, and we analyzed MMP-13-dependent damage. We show that the small ROS, H2O2, is increased in basal keratinocytes following treatment with paclitaxel. Cytoplasmic H2O2 appears to derive, at least in part, from mitochondrial damage, leading to upregulation of MMP-13, which in turn underlies increased epidermal extracellular matrix degradation. Intriguingly, also axonal mitochondria show signs of damage, such as fusion/fission defects and vacuolation, but axons do not show increased levels of H2O2. Since MMP-13 inhibition prevents axon degeneration but does not prevent mitochondrial vacuolation, we suggest that vacuolization occurs independently of axonal damage. Finally, we show that MMP-13 dysregulation also underlies paclitaxel-induced peripheral neuropathy in mammals, indicating that epidermal mitochondrial H2O2 and its effectors could be targeted for therapeutic interventions.