Extracellular matrix (ECM) adhesion and proteolysis play important roles in embryonic development. In previous work (Behrendtsen et al. [1992] Development 114:447-456) we showed that gelatinase B activity is rate-limiting for trophoblast-mediated invasion and degradation of ECM in culture. In the present study, we show that metalloproteinases (MMPs) have distinct roles in migration along ECM as opposed to invasion through ECM. We investigated the role of ECM proteolysis in the differentiation and migration of parietal endoderm (PE), the first embryonic migratory cell type, adhering to ECM surfaces. Gelatinase B was the major MMP of PE; mRNA and protein were detected in PE of 7.5-and 8.5-day embryos. Using cultures of inner cell masses (ICMs) isolated from mouse blastocysts, we found that inhibitors of metalloproteinases, specifically, tissue inhibitor of metalloproteinases (TIMP)-1 and a peptide hydroxamic acid stimulated outgrowth and differentiation of PE from ICMs cultured on fibronectin, but inhibitors of plasminogen activators did not. TIMP-1 increased the number of PE cells and mean distance migrated and increased expression of the PE differentiation marker vimentin; the increase in cell number was not at the expense of other cell types. The stimulatory effect of TIMP-1 was most marked on low concentrations of substrate fibronectin, decreasing as concentrations of fibronectin increased. TIMP-1 also stimulated the outgrowth of PE in blastocyst cultures and in ICM/trophectoderm co-cultures; in ICM/trophectoderm co-cultures TIMP-1 stimulated PE differentiation on higher concentrations of fibronectin than was permissive for ICMs cultured alone. These data indicate that metalloproteinase inhibitors preserved the migration-inducing status of the ECM. We conclude that metalloproteinases have distinct roles in invasive activity through ECM barriers and migratory activity along ECM surfaces.