White adipose tissue (WAT) serves as the primary energy depot in the body by storing fat. During development, fat cell precursors (i.e., preadipocytes) undergo a hypertrophic response as they mature into lipid-laden adipocytes. However, the mechanisms that regulate adipocyte size and mass remain undefined. Herein, we demonstrate that the membrane-anchored metalloproteinase, MT1-MMP, coordinates adipocyte differentiation in vivo. In the absence of the protease, WAT development is aborted, leaving tissues populated by mini-adipocytes which render null mice lipodystrophic. While MT1-MMP preadipocytes display a cell autonomous defect in vivo, null progenitors retain the ability to differentiate into functional adipocytes during 2-dimensional (2-D) culture. By contrast, within the context of the 3-dimensional (3-D) ECM, normal adipocyte maturation requires a burst in MT1-MMP-mediated proteolysis that modulates pericellular collagen rigidity in a fashion that controls adipogenesis. Hence, MT1-MMP acts as a 3-D-specific adipogenic factor that directs the dynamic adipocyte-ECM interactions critical to WAT development.