TEL is a member of the ETS family of transcription factors that interacts with the mSin3 and SMRT corepressors to regulate transcription. TEL is biallelically disrupted in acute leukemia, and loss of heterozygosity at the TEL locus has been observed in various cancers. Here we show that expression of TEL in Ras-transformed NIH 3T3 cells inhibits cell growth in soft agar and in normal cultures. Unexpectedly, cells expressing both Ras and TEL grew as aggregates. To begin to explain the morphology of Ras-plus TEL-expressing cells, we demonstrated that the endogenous matrix metalloproteinase stromelysin-1 was repressed by TEL. TEL bound sequences in the stromelysin-1 promoter and repressed the promoter in transient-expression assays, suggesting that it is a direct target for TEL-mediated regulation. Mutants of TEL that removed a binding site for the mSin3A corepressor but retained the ETS domain failed to repress stromelysin-1. When BB-94, a matrix metalloproteinase inhibitor, was added to the culture medium of Ras-expressing cells, it caused a cell aggregation phenotype similar to that caused by TEL expression. In addition, TEL inhibited the invasiveness of Ras-transformed cells in vitro and in vivo. Our results suggest that TEL acts as a tumor suppressor, in part, by transcriptional repression of stromelysin-1.