Insulin-like growth factor (IGF) II is overexpressed in many human cancers and is reactivated by, and crucial for viral oncogene (SV40 T antigen, [TAg])–induced tumorigenesis in several tumor models. Using a double transgenic murine hepatic tumor model, we demonstrate that tissue inhibitor of metalloproteinase 1 (TIMP-1) blocks liver hyperplasia during tumor development, despite TAg-mediated reactivation of IGF-II. Because the activity of IGFs is controlled by IGF-binding proteins (IGFBPs), we investigated whether TIMP-1 overexpression altered the IGFBP status in the transgenic liver. Ligand blotting showed that IGFBP-3 protein levels were increased in TIMP-1–overexpressing double transgenic littermates, whereas IGFBP-3 mRNA levels were not different, suggesting that TIMP-1 affects IGFBP-3 at a posttranscriptional level. IGFBP-3 proteolysis assays demonstrated that IGFBP-3 degradation was lower in TIMP-1–overexpressing livers, and zymography showed that matrix metalloproteinases (MMPs) were present in the liver homogenates and were capable of degrading IGFBP-3. As a consequence of reduced IGFBP-3 proteolysis and elevated IGFBP-3 protein levels, dissociable IGF-II levels were significantly lower in TIMP-1–overexpressing animals. This decrease in bioavailable IGF-II ultimately resulted in diminished IGF-I receptor signaling in vivo as evidenced by diminished receptor kinase activity and decreased tyrosine phosphorylation of the IGF-I receptor downstream effectors, insulin receptor substrate 1 (IRS-1), extracellular signal regulatory kinase (Erk)-1, and Erk-2. Together, these results provide evidence that TIMP-1 inhibits liver hyperplasia, an early event in TAg-mediated tumorigenesis, by reducing the activity of the tumor-inducing mitogen, IGF-II. These data implicate the control of MMP-mediated degradation of IGFBPs as a novel therapy for controlling IGF bioavailability in cancer.