Matrix metalloproteinases (MMP) are important regulators of tumor progression and angiogenesis. MMPs generate both proangiogenic and antiangiogenic fragments, such as vascular endothelial growth factor and endostatin. The in vivo activation of MMPs and endostatin generation occur mainly in the extracellular environment by interactions of different cell types. Therefore, these processes are necessary to study in the extracellular space in vivo. Sex steroids play a dominant role in breast carcinogenesis, by largely unknown mechanisms. In the present study, we used in vivo microdialysis to directly quantify MMP-2 and MMP-9 activity and sample endostatin from both stroma (murine) and tumor (human) cells in vivo in solid MCF-7 tumors in nude mice. We found that tamoxifen in combination with estradiol increased tumor MMP-2/MMP-9 in vivo activity, endostatin levels, and decreased tumor vascularization compared with estradiol treatment only. The stroma-derived endostatin was three to five times higher than cancer cell-generated endostatin. After inhibition of MMP-2/MMP-9, endostatin levels decreased, providing evidence that these proteases are highly involved in the generation of endostatin. Our results support the previously reported concept that MMPs may serve as negative regulators of angiogenesis. The regulation of endostatin generation by modulation of MMP-2/MMP-9 activities suggests a previously unrecognized mechanism of estradiol and tamoxifen, which may have implications for the pathogenesis of breast cancer.