The onset of scarring after injury may impede the regeneration and functional recovery of skeletal muscle. Matrix metalloproteinase-1 (MMP-1) hydrolyzes type I collagen and thus may improve muscle regeneration by resolving fibrotic tissue. We examined the effect of recombinant human MMP-1 on fibrosis in the lacerated gastrocnemius muscle of NOD/scid mice, allowing treatment potential to be ascertained in isolation from immune response. The efficacy of proMMP-1 and active MMP-1 were compared with or without poly(ethylene glycol) (PEG) modification, which was intended to increase the enzyme’s stability. Active MMP-1 was most effective in reducing fibrosis, although treatment with proMMP-1 was also beneficial relative to controls. PEG-modified MMP-1 had minimal activity in vivo, despite retaining activity towards a thioester substrate. Moreover, the modified enzyme was inactivated by trypsin and subtilisin at rates comparable to that of native MMP-1. These results and those of computational structural studies suggest that modification occurs at the C-terminal hemopexin domain of MMP-1, which plays a critical role in collagen turnover. Site-specific modifications that spares catalytic and substrate binding sites while protecting susceptible proteolytic digestion sites may be beneficial. We conclude that active MMP-1 can effectively reduce muscle scarring and that its activity is related to the ability of the enzyme to digest collagen, thereby facilitating remodeling of the injured muscle.