MT1-MMP is a type I transmembrane proteinase that promotes cell migration and invasion. Here, we report that MT1-MMP is palmitoylated at Cys574 in the cytoplasmic domain, and this lipid modification is critical for its promotion of cell migration and clathrin-mediated internalization. The palmitoylation-defective mutant (C574A) failed to promote cell migration and was not internalized through clathrin pathway like wild-type, but it was internalized through the caveolae pathway. Reintroducing a cysteine at different positions in the cytoplasmic tail of the C574A mutant revealed that the position of the palmitoylated cysteine relative to LLY573, a motif that interacts with mu2 subunit of adaptor protein 2, is critical for the cell motility-promoting activity of MT1-MMP and its clathrin-mediated internalization. Taken together, palmitoylation of MT1-MMP is one of the key posttranslational modifications that determines MT1-MMP-dependent cell migration.