Amyloid-beta precursor protein (APP) was identified on expression cloning from a human placenta cDNA library as a gene product that modulates the activity of membrane-type matrix metalloproteinase-1 (MT1-MMP). Co-expression of MT1-MMP with APP in HEK293T cells induced cleavage and shedding of the APP ectodomain when co-expressed with APP adaptor protein Fe65. Among the MT-MMPs tested, MT3-MMP and MT5-MMP also caused efficient APP shedding. The recombinant APP protein was cleaved by MT3-MMP in vitro at the A(463) -M-464, N-579 -M-580, H-622-S-623, and H-685 -Q(686) peptide bonds, which included a cleavage site within the amyloid P peptide region known to produce a C-terminal fragment. The Swedish-type mutant of APP, which produces a high level of amyloid 0 peptide, was more effectively cleaved by MT3-MMP than wild-type APP in both the presence and absence of Fe65; however, amyloid P peptide production was not affected by MT3-MMP expression. Expression of MT3-MMP enhanced Fe65-dependent transactivation by APP fused to the Gal4 DNA-binding and transactivation domains. These results suggest that MT1-MMP, MT3-MMP and MT5-MMP should play an important role in the regulation of APP functions in tissues including the central nervous system.