Notch signalling controls the differentiation of haematopoietic progenitor cells (HPCs). Here, we show that loss of membrane-type 1 matrix metalloproteinase (MT1-MMP, MMP14), a cell surface protease expressed in bone marrow stromal cells (BMSCs), increases Notch signalling in HPCs and specifically impairs B-lymphocyte development. When co-cultured with BMSCs in vitro, HPCs differentiation towards B lymphocytes is significantly compromised on MT1-MMP-deficient BMSCs and this defect could be completely rescued by DAPT, a specific Notch signalling inhibitor. The defective B-lymphocyte development could also be largely rescued by DAPT in vivo. MT1-MMP interacts with Notch ligand Delta-like 1 (Dll1) and promotes its cleavage on cell surface in BMSCs. Ectopic MT1-MMP cleaves Dll1 and results in diminished Notch signalling in co-cultured cells. In addition, recombinant MT1-MMP cleaves a synthetic Dll1 peptide at the same site where MT1-MMP cleaves Dll1 on the cell surface. Our data suggest that MT1-MMP directly cleaves Dll1 on BMSCs to negatively regulate Notch signalling to specifically maintain normal B-cell development in bone marrow.