PTK7 is an essential component of the Wnt/planar cell polarity (PCP) pathway. We provide evidence that the Wnt/PCP pathway converges with pericellular proteolysis in both normal development and cancer. Here, we demonstrate that membrane type-1 matrix metalloproteinase (MT1-MMP), a key proinvasive proteinase, functions as a principal sheddase of PTK7. MT1-MMP directly cleaves the exposed PKP(621)↓LI sequence of the seventh Ig-like domain of the full-length membrane PTK7 and generates, as a result, an N-terminal, soluble PTK7 fragment (sPTK7). The enforced expression of membrane PTK7 in cancer cells leads to the actin cytoskeleton reorganization and the inhibition of cell invasion. MT1-MMP silencing and the analysis of the uncleavable L622D PTK7 mutant confirm the significance of MT1-MMP proteolysis of PTK7 in cell functions. Our data also demonstrate that a fine balance between the metalloproteinase activity and PTK7 levels is required for normal development of zebrafish (Danio rerio). Aberration of this balance by the proteinase inhibition or PTK7 silencing results in the PCP-dependent convergent extension defects in the zebrafish. Overall, our data suggest that the MT1-MMP-PTK7 axis plays an important role in both cancer cell invasion and normal embryogenesis in vertebrates. Further insight into these novel mechanisms may promote understanding of directional cell motility and lead to the identification of therapeutics to treat PCP-related developmental disorders and malignancy.