The invasion of human malignant melanoma cells into the extracellular matrix (ECM) involves the accumulation of proteases at sites of ECM degradation where activation of matrix metalloproteases (MMP) occurs. Here, we show that when membrane type 1 MMP (MT-MMP) was overexpressed in RPMI7951 human melanoma cells, the cells made contact with the ECM, activated soluble and ECM-bound MMP-2, and degraded and invaded the ECM. Further experiments demonstrated the importance of localization of the MT-MMP to invadopodia. Overexpression of MT-MMP without invadopodial localization caused activation of soluble MMP-2, but did not facilitate ECM degradation or cell invasiveness. Up-regulation of endogenous MT-MMP with concanavalin A caused activation of MMP-2. However, concanavalin A treatment prevented invadopodial localization of MT-MMP and ECM degradation. Neither a truncated MT-MMP mutant lacking transmembrane (TM) and cytoplasmic domains (DeltaTMMT-MMP), nor a chimeric MT-MMP containing the interleukin 2 receptor alpha chain (IL-2R) TM and cytoplasmic domains (DeltaTMMT-MMP/TMIL-2R) were localized to invadopodia or exhibited ECM degradation. Furthermore, a chimera of the TM/cytoplasmic domain of MT-MMP (TMMT-MMP) with tissue inhibitor of MMP 1 (TIMP-1/TMMT-MMP) directed the TIMP-1 molecule to invadopodia. Thus, the MT-MMP TM/cytoplasmic domain mediates the spatial organization of MT-MMP into invadopodia and subsequent degradation of the ECM.