Up-regulation of the collagenolytic membrane type-1 matrix metalloproteinase (MT1-MMP) leads to increased MMP2 (gelatinase A) activation and MT1-MMP autolysis. The autocatalytic degradation product is a cell surface 44-kDa fragment of MT1-MMP (Gly(285)-Val(582)) in which the ectodomain consists of only the linker, hemopexin C domain and the stalk segment found before the transmembrane sequence. In the collagenases, hemopexin C domain exosites bind native collagen, which is required for triple helicase activity during collagen cleavage. Here we investigated the collagen binding properties and the role of the hemopexin C domain of MT1-MMP and of the 44-kDa MT1-MMP ectodomain in collagenolysis. Recombinant proteins, MT1-LCD (Gly(285)-Cys(508)), consisting of the linker and the hemopexin C domain, and MT1-CD (Gly(315)-Cys(508)), which consists of the hemopexin C domain only, were found to bind native type I collagen but not gelatin. Functionally, MT1-LCD inhibited collagen-induced MMP2 activation in fibroblasts, suggesting that interactions between collagen and endogenous MT1-MMP directly stimulate the cellular activation of pro-MMP2. MT1-LCD, but not MT1-CD, also blocked the cleavage of native type I collagen by MT1-MMP in vitro, indicating an important role for the MT1-MMP linker region in triple helicase activity. Similarly, soluble MT1-LCD, but not MT1-CD or peptide analogs of the MT1-MMP linker, reduced the invasion of type I collagen matrices by MDA-MB-231 cells as did the expression of recombinant 44-kDa MT1-MMP on the cell surface. Together, these studies demonstrate that generation of the 44-kDa MT1-MMP autolysis product regulates collagenolytic activity and subsequent invasive potential, suggesting a novel feedback mechanism for the control of pericellular proteolysis.