Type I collagen-containing fibrils are major structural components of the extracellular matrix of vertebrate tissues, especially tendon, but how they are formed is not fully understood. MMP14 is a potent pericellular collagenase that can cleave type I collagen in vitro. In this study, we show that tendon development is arrested in Scleraxis-Cre::Mmp14 lox/lox mice that are unable to release collagen fibrils from plasma membrane fibripositors. In contrast to its role in collagen turnover in adult tissue, MMP14 promotes embryonic tissue formation by releasing collagen fibrils from the cell surface. Notably, the tendons grow to normal size and collagen fibril release from fibripositors occurs in Col-r/r mice that have a mutated collagen-I that is uncleavable by MMPs. Furthermore, fibronectin (not collagen-I) accumulates in the tendons of Mmp14-null mice. We propose a model for cell-regulated collagen fibril assembly during tendon development in which MMP14 cleaves a molecular bridge tethering collagen fibrils to the plasma membrane of fibripositors.