We have used C-terminal domain mutants to further define the role of interactions of progelatinase A and membrane type 1 matrix metalloproteinase (MT1 MMP) in the binding of TIMP2 and in the cell-associated activation of progelatinase A. Soluble constructs of MT1 MMP were used to demonstrate that binding with TIMP2 occurs primarily through N-terminal domain interactions, leaving the C-terminal domain free for interactions with progelatinase A. The rate of autolytic activation of progelatinase A initiated by MT1 MMP cleavage could be potentiated by concentration of the proenzyme by binding to heparin. Residues 568-631 of the progelatinase A C-terminal domain are important in formation of the heparin binding site, since replacement of this region with the corresponding stromelysin-1 sequence abolished binding to heparin and the potentiation of activation. The same region of gelatinase A was required for binding of latent and active enzyme to TIMP2, but residues 418-474 were not important. A similar pattern was seen using cell membrane-associated MT1 MMP; residues 568-631 were required for binding and activation of progelatinase A, whereas residues 418-474 were not. Neither region was required for activation in solution. The addition of TIMP2 to HT1080 membrane preparations expressing MT1 MMP, but depleted of endogenous TIMP2, resulted in potentiation of progelatinase A activation. This effect was dependent upon TIMP2 binding to MT1 MMP rather than at an independent membrane site. Together, the data suggest that TIMP2 forms a receptor with MT1 MMP that regulates the concentration and efficient generation of functionally active gelatinase A.