Tumor necrosis factor (TNF) prodrugs are fusion proteins comprised of an N-terminal single-chain antibody variable fragment (scFv) targeting a TNF effector and a C-terminal TNF receptor (TNFR)1-derived inhibitor module. Introduction of matrix metalloproteinase (MMP)-2 recognition motifs between TNF and the TNFR1 fragment allowed activation by recombinant MMP-2 and MMP-expressing HT1080 cells. Processing by endogeneous MMPs required specific membrane binding of the TNF prodrug via the targeting scFv, ensuring strictly antigen-dependent activation. Interestingly, TNF bioactivity of the processed prodrug was approximately 1000-fold higher upon scFv-mediated targeting, and signaled juxtatropic cell death also to antigen-negative cells. Microscopical analyses of TNFR2 clustering and TNF receptor-associated factor 2 recruitment at contact sites to adjacent cells revealed the formation of stable TNFR complexes by target-bound, processed prodrug, resembling the increased signal capacity of natural, membrane-expressed TNF. MMP-2-sensitive TNF prodrugs represent novel cytokine-based reagents for targeted cancer therapy, which should be exploitable for MMP-overexpressing tumors.