Cultured bovine arterial smooth muscle cells express 6 to 7 ng basic fibroblast growth factor (bFGF)/mg cell protein and distribute it to two compartments. About 80% of total bFGF remain intracellularly, 20% are present in the pericellular (trypsin-releasable) compartment. No bFGF can be detected in the culture medium. All bFGF fractions have full biological activity. They are quantified by a highly specific immunoassay system and identified after sodium dodecyl sulfate polyacrylamide electrophoresis as a 18 kDa double band by immunoblotting. During exponential growth the intracellular concentration of bFGF decreases from about 130 pg to 20 to 40 pg/10(5) cells. Simultaneously the pericellular bFGF increases to 60-70% of total bFGF, but declines continuously with increasing cell density, whereas the intracellular bFGF reincreases under these conditions. The pericellular bFGF is known to form complexes with (membrane integrated) proteoheparan sulfate which undergoes structural changes during transition from subconfluent to confluent growth status. After metabolic labeling of the cells with [35S]sulfate and [3H]glucosamine, the 35S/3H ratio of heparan sulfate oligosaccharides increases from 1.58 during proliferation to 2.47 in growth-inhibited cells. The results indicate that the bFGF-induced proliferation of arterial smooth muscle cells depends on the pericellular localization of bFGF and on a specific molecular organization of the cell surface heparan sulfate. Depending on its specific structural characteristics heparan sulfate may promote or inhibit bFGF receptor binding and signal transduction.