MMP14 encodes a membrane-tethered metalloproteinase MT1-MMP, capable of remodeling the extracellular matrix and modulating receptors on the cell surface. Loss of MT1-MMP results in craniofacial abnormalities. Here we show that MT1-MMP forms a complex with FGFR2 and ADAM9 in osteoblasts and proteolytically inactivates ADAM9, hence protecting FGFR2 from ADAM9-mediated ectodomain shedding on the cell surface. In Mmp14-/- osteoblasts, FGF-induced proliferation and downstream signaling are specifically compromised, in conjunction with ADAM9 upregulation and FGFR2 shedding. The retarded parietal growth in Mmp14-/- embryos starts at 15.5 dpc, attributable to the impaired FGFR2 signaling due to increased shedding mediated by ADAM9. Adam9 depletion completely rescues the defective FGFR2 signaling and largely restores calvarial bone growth in Mmp14-/- embryos. These data reveal a regulatory paradigm for FGRF2 signaling and identify MT1-MMP as a critical negative modulator of ADAM9 activity to maintain FGFR2 signaling in calvarial osteogenesis.