Sensory processing deficits are common in autism spectrum disorders, but the underlying mechanisms are unclear. Fragile X Syndrome (FXS) is a leading genetic cause of intellectual disability and autism. Electrophysiological responses in humans with FXS show reduced habituation with sound repetition and this deficit may underlie auditory hypersensitivity in FXS. Our previous study in Fmr1 knockout (KO) mice revealed an unusually long state of increased sound-driven excitability in auditory cortical neurons suggesting that cortical responses to repeated sounds may exhibit abnormal habituation as in humans with FXS. Here, we tested this prediction by comparing cortical event related potentials (ERP) recorded from wildtype (WT) and Fmr1 KO mice. We report a repetition-rate dependent reduction in habituation of N1 amplitude in Fmr1 KO mice and show that matrix metalloproteinase −9 (MMP-9), one of the known FMRP targets, contributes to the reduced ERP habituation. Our studies demonstrate a significant up-regulation of MMP-9 levels in the auditory cortex of adult Fmr1 KO mice, whereas a genetic deletion of Mmp-9 reverses ERP habituation deficits in Fmr1 KO mice. Although the N1 amplitude of Mmp-9/Fmr1 DKO recordings was larger than WT and KO recordings, the habituation of ERPs in Mmp-9/Fmr1 DKO mice is similar to WT mice implicating MMP-9 as a potential target for reversing sensory processing deficits in FXS. Together these data establish ERP habituation as a translation relevant, physiological pre-clinical marker of auditory processing deficits in FXS and suggest that abnormal MMP-9 regulation is a mechanism underlying auditory hypersensitivity in FXS.