The Drosophila Dorsal Air Sac Primordium (ASP) is a tracheal tube that grows toward Branchless FGF-expressing cells in the wing imaginal disc. We show that the ASP arises from a tracheal branch that invades the basal lamina of the disc to juxtapose directly with disc cells. We examined the role of matrix metalloproteases (Mmps), and found that reducing Mmp2 activity perturbed disc-trachea association, altered peritracheal distributions of collagen IV and Perlecan, misregulated ASP growth, and abrogated development of the dorsal air sacs. Whereas the function of the membrane-tethered Mmp2 in the ASP is non-cell autonomous we find that it may have distinct tissue-specific roles in the ASP and disc. These findings demonstrate a critical role for Mmp2 in tubulogenesis post-induction, and implicate Mmp2 in regulating dynamic and essential changes to the extracellular matrix.