The role of extracellular proteolysis in inflammatory demyelination, originally hypothesized as a mechanism for myelin degradation, is increasingly recognized as a pathogenetic step and as a target for therapy in human demyelinating disease. The activation of ubiquitous plasminogen by urokinase (u-PA) and tissue-type plasminogen activator (t-PA), which is associated with various neuropathologies, including multiple sclerosis (MS), is the key initiator of the activation cascade of the four classes of matrix metalloproteinases (MMPs): collagenases, stromelysins, membrane-type metalloproteinases and gelatinases. Spatiotemporal protein and mRNA expression of gelatinase B (MMP-9) and matrilysin (MMP-7) have been documented respectively in MS lesions and in the central nervous system (CNS) of animals developing experimental autoimmune encephalomyelitis (EAE). A close interaction between disease-promoting cytokines and extracellularly acting proteases is deduced from in vitro experiments. Cytokines regulate the balance between the proteases and their respective specific inhibitors at the transcriptional level, while proteolysis is a reciprocal mechanism to enhance (by activation) or downmodulate (by degradation) the specific activities of cytokines. In acute inflammation the contribution of chemokines is hierarchically organised, interleukin-8 (IL-8) and related CXC-chemokines inducing a rapid influx of neutrophils in the acute lesions and an instantaneous exocytosis of gelatinase B granules. This results in sudden and extensive damage to the CNS. In chronic disease involving autoimmune processes CC-chemokines that act mainly on mononuclear cell types appear to be more strictly regulated. As MMPs modify matrix components, promoting extravasation of lymphocytes and monocytes/macrophages and have the potential to generate encephalitogenic peptides from myelin basic protein, novel treatments for demyelinating diseases may be predicted by specific inhibition of these enzymes. Here we review plasminogen activators and the MMP family, in the context of their role in CNS inflammation and demyelination and highlight studies in which intervention in these protease cascades are and may be used to treat demyelinating diseases.