Human matrix metalloproteinase-1 (MMP-1) is a zinc(II)-dependent enzyme that catalyzes collagenolysis. Despite the availability of extensive experimental data, the mechanism of MMP-1-catalyzed collagenolysis remains poorly understood due to the lack of experimental structure of a catalytically productive enzyme-substrate complex of MMP-1. In this study, we apply molecular dynamics and combined quantum mechanics/molecular mechanics to reveal the reaction mechanism of MMP-1 based on a computationally modeled structure of the catalytically competent complex of MMP-1 that contains a large triple-helical peptide substrate. Our proposed mechanism involves the participation of an auxiliary (second) water molecule (wat2) in addition to the zinc(II)-coordinated water (wat1). The reaction initiates through a proton transfer to Glu219, followed by a nucleophilic attack by a zinc(II)-coordinated hydroxide anion nucleophile at the carbonyl carbon of the scissile bond, leading to the formation of a tetrahedral intermediate (IM2). The process continues with a hydrogen-bond rearrangement to facilitate proton transfer from wat2 to the amide nitrogen of the scissile bond and, finally, C-N bond cleavage. The calculations indicate that the rate-determining step is the water-mediated nucleophilic attack with an activation energy barrier of 22.3 kcal/mol. Furthermore, the calculations show that the hydrogen-bond rearrangement/proton-transfer step can proceed in a consecutive or concerted manner, depending on the conformation of the tetrahedral intermediate, with the consecutive mechanism being energetically preferable. Overall, the study reveals the crucial role of a second water molecule and the dynamics for effective MMP-1-catalyzed collagenolysis.