Vascular endothelial growth factor (VEGF) is a critical mediator of blood vessel formation during development and in pathological conditions. In this study, we demonstrate that VEGF bioavailability is regulated extracellularly by matrix metalloproteinases (MMPs) through intramolecular processing. Specifically, we show that a subset of MMPs can cleave matrix-bound isoforms of VEGF, releasing soluble fragments. We have mapped the region of MMP processing, have generated recombinant forms that mimic MMP-cleaved and MMP-resistant VEGF, and have explored their biological impact in tumors. Although all forms induced similar VEGF receptor 2 phosphorylation levels, the angiogenic outcomes were distinct. MMP-cleaved VEGF promoted the capillary dilation of existent vessels but mediated a marginal neovascular response within the tumor. In contrast, MMP-resistant VEGF supported extensive growth of thin vessels with multiple and frequent branch points. Our findings support the view that matrix-bound VEGF and nontethered VEGF provide different signaling outcomes. These findings reveal a novel aspect in the regulation of extracellular VEGF that holds significance for vascular patterning.