Elevated expression of type IV collagenases (MMP-2 and MMP-9) has been strongly correlated with tumour progression and metastasis in various tumours. Here, we analysed expression and activation of these MMPs in non-tumourigenic HaCaT cells and the malignant HaCaT variant II-4(rt). In monolayer cultures, both cell types secreted latent MMP-2 (proMMP-2) in comparable amounts, while MMP-9 production was clearly higher in II-4(rt)cells. Upon contact with fibrillar collagen type I the malignant II-4(rt)cells, but not the HaCaT cells, gained the capability to activate proMMP-2. This process is shown to be membrane-associated and mediated by MT1-MMP. Surprisingly, all membrane preparations from either HaCaT cells or II-4(rt)cells grown as monolayers, as well as within collagen gels, contained considerable amounts of active MT1-MMP. However, within collagen gels HaCaT cells showed significantly higher TIMP-2 levels compared to II-4(rt)cells. This indicates that TIMP-2 might play a central role for MT1-MMP-mediated gelatinolytic activity. Indeed, collagen type I-induced MT1-MMP-mediated proMMP-2 activation by II-4(rt)membranes could be completely abolished by an excess of TIMP-2. In conclusion, our data suggest that MT1-MMP-mediated proMMP-2 activation might be associated with malignant progression of epidermal tumour cells.