Matrix metalloproteinases (MMPs) are expressed during lung development, but their role may be limited, as mice deficient in MMP-3, 7, 9, or 12 develop a normal adult lung. Because membrane-type 1 matrix metalloproteinase (MT1-MMP) is expressed in the developing lung epithelium, we examined the lung structure of MT1-MMP-deficient (-/-) mice. Branching morphogenesis was normal, but alveolar development was abnormal in the MT1-MMP-/- lungs with 40% less alveolar surface area at 1 month (P < 0.01). MT1-MMP-/- airways and alveoli had an abnormal ultrastructural appearance, but epithelial cell differentiation markers were distributed similarly in both strains. There was no evidence of excess extracellular matrix deposition or inflammation at the time points examined. In contrast, by adulthood MMP-2-/- mice had normal alveolar size and structure, indicating normal alveolar development was not dependent on the ability of MT1-MMP to activate pro-MMP-2. These data indicate that MT1-MMP is required for normal lung development.