Epithelial-mesenchymal transition (EMT) plays an important role in organ fibrosis, including that of the kidney. Loss of E-cadherin expression is a hallmark of EMT; however, whether the loss of E-cadherin is a consequence or a cause of EMT remains unknown, especially in the renal system. In this study, we show that transforming growth factor (TGF)-β1-induced EMT in renal tubular epithelial cells is dependent on proteolysis. Matrix metalloproteinase-mediated E-cadherin disruption led directly to tubular epithelial cell EMT via Slug. TGF-β1 induced the proteolytic shedding of E-cadherin, which caused the nuclear translocation of β-catenin, the transcriptional induction of Slug, and the repression of E-cadherin transcription in tubular epithelial cells. These findings reveal a direct role for E-cadherin and for matrix metalloproteinases in causing EMT downstream of TGF-β1 in fibrotic disease. Specific inhibition rather than activation of matrix metalloproteinases may offer a novel approach for treatment of fibrotic disease.