Background: Lung injury promotes the expression of matrix metalloproteinase-7 (MMP7, matrilysin), which is required for neutrophil recruitment and re-epithelialization. MMP7 governs the lung inflammatory response through the shedding of syndecan-1. Because inflammation and repair are related events, we evaluated the role of syndecan-1 shedding in lung reepithelialization. Methodology/Principal Finding: Epithelial injury induced syndecan-1 shedding from wild-type epithelium but not from Mmp7 mice in vitro and in vivo. Moreover, cell migration and wound closure was enhanced by MMP7 shedding of syndecan-1. Additionally, we found that syndecan-1 augmented cell adhesion to collagen by controlling the affinity state of the αβ integrin. Conclusion/Significance: MMP7 shedding of syndecan-1 facilitates wound closure by causing the αβ integrin to assume a less active conformation thereby removing restrictions to migration. MMP7 acts in the lungs to regulate inflammation and repair, and our data now show that both these functions are controlled through the shedding of syndecan-1. © 2009 Chen et al.