Cell surface proteolysis is an integral yet poorly understood physiological process. The present study has examined how the pericellular collagenase membrane-type 1 matrix metalloproteinase (MT1-MMP) and membrane-mimicking environments interplay in substrate binding and processing. NMR derived structural models indicate that MT1-MMP transiently associates with bicelles and cells through distinct residues in blades III and IV of its hemopexin-like domain, while binding of collagen-like triple-helices occurs within blades I and II of this domain. Examination of simultaneous membrane interaction and triple-helix binding revealed a possible regulation of proteolysis due to steric effects of the membrane. At bicelle concentrations of 1%, enzymatic activity towards triple-helices was increased 1.5-fold. A single mutation in the putative membrane interaction region of MT1-MMP (Ser466Pro) resulted in lower enzyme activation by bicelles. An initial structural framework has thus been developed to define the role(s) of cell membranes in modulating proteolysis.