Matrix metalloproteinases (MMPs) are a large conserved family of extracellular proteases, a number of which are expressed during neuronal development and upregulated in nervous system diseases. Primarily on the basis of studies using pharmaceutical inhibitors, MMPs have been proposed to degrade the extracellular matrix to allow growth cone advance during development and hence play largely permissive roles in axon extension. Here we show that MMPs are not required for axon extension in the Drosophila embryo, but rather are specifically required for the execution of several stereotyped motor axon pathfinding decisions. The Drosophila genome contains only two MMP homologs, Mmp1 and Mmp2. We isolated Mmp1 in a misexpression screen to identify molecules required for motoneuron development. Misexpression of either MMP inhibits the regulated separation/defasciculation of motor axons at defined choice points. Conversely, motor nerves in Mmp1 and Mmp2 single mutants and Mmp1 Mmp2 double mutant embryos are loosely bundled/fasciculated, with ectopic axonal projections. Quantification of these phenotypes reveals that the genetic requirement for Mmp1 and Mmp2 is distinct in different nerve branches, although generally Mmp2 plays the predominant role in pathfinding. Using both an endogenous MMP inhibitor and MMP dominant-negative constructs, we demonstrate that MMP catalytic activity is required for motor axon fasciculation. In support of the model that MMPs promote fasciculation, we find that the defasciculation observed when MMP activity is compromised is suppressed by otherwise elevating interaxonal adhesion -- either by overexpressing Fas2 or by reducing Sema-1a dosage. These data demonstrate that MMP activity is essential for embryonic motor axon fasciculation.