Heparin-binding EGF-like growth factor (HB-EGF) is a recently identified member of the EGF family of growth factors and a potent mitogen for smooth muscle cells and fibroblasts. Chinese hamster ovary (CHO) cells genetically engineered to express the human EGF receptor bind with high affinity both EGF and HB-EGF. CHO mutant cells lacking heparan sulfate proteoglycans (HSPG) bind EGF equally well to wild-type cells and EGF binding is not affected by exogenous heparin. However, HSPG-deficient EGF receptor-expressing cells do not bind significant levels of HB-EGF unless heparin is present in the binding medium. Moreover, binding of radiolabeled EGF to HSPG-deficient EGF receptor-expressing cells is efficiently displaced by nonlabeled HB-EGF only in the presence of heparin. Signal transduction by the EGF receptor tyrosine kinase as evidenced by receptor autophosphorylation is induced by HB-EGF only in the presence of heparin, in contrast to EGF-induced receptor autophosphorylation, which is independent of heparin. These results directly demonstrate that HB-EGF but not EGF requires heparin or cell surface HSPG for binding and activation of the EGF receptor and that HB-EGF receptor interactions can be tightly regulated by the available local concentration of heparin-like molecules.