MicroRNAs, including the tumor-suppressor miR-126 and the oncogene miR-221, regulate tumor formation and growth in colitis-associated cancer (CAC) and colorectal cancer (CRC). This study explores the impact of the epithelial cytokine heparin-binding epidermal growth factor (HB-EGF) and its receptor epidermal growth factor receptor (EGFR) on the pathogenesis of CAC and CRC, particularly in the regulation of microRNA-driven tumor growth and protease expression. In murine models of CRC and CAC, lack of miR-126 and elevated miR-221 expression in colonic tissues enhanced tumor formation and growth. MiR-126 downregulation in colon cells established a pro-tumorigenic proteolytic niche by targeting HB-EGF-active metalloproteinase-7, -9 (MMP7/MMP9), disintegrin, and metalloproteinase domain-containing protein 9, and modulating chemokine-mediated recruitment of HB-EGF-loaded inflammatory cells. Mechanistically, downregulation of HB-EGF and EGFR in the colon suppressed miR-221 and enhanced miR-126 expression via activating enhancer-binding protein 2 alpha. Reintroducing miR-126 reduced tumor development and HB-EGF expression. Combining miR-126 reintroduction, which targets specific HB-EGF-active proteases but not ADAM17, with MMP inhibitors like Batimastat or Marimastat effectively suppressed tumor growth. This combination normalized protease expression and balanced miR-126 and miR-221 levels in developing and growing tumors. These findings demonstrate that suppressing HB-EGF and EGFR1 shifts the balance from oncogenic miR-221 to tumor-suppressive miR-126 action. Consequently, normalizing miR-126 expression could open new avenues for treating patients with CAC and CRC, and this normalization is intertwined with the anticancer efficacy of MMP inhibitors.