Matrix Metalloproteinases (Mmps) degrade glycoproteins and proteoglycans of the extracellular matrix (ECM) or cell surface and are crucial for morphogenesis. Mmps and their inhibitors are expressed during early stages of cardiac development in vertebrates and expression is altered in multiple congenital cardiomyopathies such as cardia bifida. Drosophila genome encodes two copies of Mmps, Mmp1 and Mmp2 whereas in humans up to 25 Mmps have been identified with overlapping functions. We investigated the role of Mmps during embryonic heart development in Drosophila, a process which is morphogenetically similar to early heart tube formation in vertebrates. We demonstrate that the two Mmps in Drosophila have distinct and overlapping roles in cell motility, cell adhesion and cardiac lumenogenesis. We determined that Mmp1 and Mmp2 promote Leading Edge membrane dynamics of cardioblasts during collective migration. Mmp2 is essential for cardiac lumen formation, and mutants generate a cardia bifida phenotype. Mmp1 is required for luminal expansion. Mmp1 and Mmp2 both localise to the basal domains of cardiac cells, however, occupy non-overlapping domains apically. Mmp1 and Mmp2 regulate the proteoglycan composition and size of the apical and basal ECM, yet only Mmp2 is required to restrict ECM assembly to the lumen. Mmp1 negatively regulates the size of the adhesive Cadherin cell surface domain, whereas in a complementary fashion, Mmp2 negatively regulates the size of the Integrin-ECM domain and thereby prescribes the domain to establish and restrict Slit morphogen signalling. Inhibition of Mmp activity through ectopic expression of Tissue Inhibitor of Metalloproteinase in the ectoderm blocks lumen formation. Therefore, Mmp expression and function identifies ECM differentiation and remodelling as a key element for cell polarisation and organogenesis.