In proliferative diabetic retinopathy (PDR), retinal ischemia promotes neovascularization (NV), which can lead to profound vision loss in diabetic patients. Treatment for PDR, panretinal photocoagulation, is inherently destructive and has significant visual consequences. Therapies targeting vascular endothelial growth factor (VEGF) have transformed the treatment of diabetic eye disease, but have proven inadequate for treating NV, prompting exploration for additional therapeutic options for PDR patients. In this regard, extracellular proteolysis is an early and sustained activity strictly required for NV. Extracellular proteolysis in NV is facilitated by the dysregulated activity of matrix metalloproteinases (MMPs). Here we set out to better understand the regulation of MMPs by ischemia in PDR. We demonstrate that accumulation of hypoxia-inducible factor-1α in Müller cells induces expression of VEGF, which in turn, promotes increased MMP-2 expression and activity in neighboring endothelial cells. MMP-2 expression was detected in endothelial cells in retinal NV tissue from PDR patients while MMP-2 protein levels were elevated in the aqueous of PDR patients compared to controls. Our findings demonstrate a complex interplay among hypoxic Müller cells, secreted angiogenic factors, and neighboring endothelial cells in the regulation of MMP-2 in retinal NV, and identify MMP-2 as a target for the treatment of PDR.