Matrix remodeling plays central roles in a range of physiological and pathological processes and is driven predominantly by the activity of matrix metalloproteinases (MMPs), which degrade extracellular matrix (ECM) proteins. Our understanding of how MMPs regulate cell and tissue dynamics is often incomplete as in vivo approaches are lacking and many in vitro strategies cannot provide high-resolution, quantitative measures of enzyme activity in situ within tissue-like 3D microenvironments. Here, we incorporate a Förster resonance energy transfer (FRET) sensor of MMP activity into fully synthetic hydrogels that mimic many properties of the native ECM. We then use fluorescence lifetime imaging to provide a real-time, fluorophore concentration-independent quantification of MMP activity, establishing a highly accurate, readily adaptable platform for studying MMP dynamics in situ. MCF7 human breast cancer cells encapsulated within hydrogels highlight the detection of MMP activity both locally, at the sub-micron level, and within the bulk hydrogel. Our versatile platform may find use in a range of biological studies to explore questions in the dynamics of cancer metastasis, development, and tissue repair by providing high-resolution, quantitative and in situ readouts of local MMP activity within native tissue-like environments.