The interaction of heparan sulfate with protein ligands depends on unique oligosaccharide sequences containing iduronic acid (IdUA), N-sulfated glucosamine residues, and O-sulfated sugars. To study the role of O-sulfation in greater detail, we isolated a Chinese hamster ovary cell mutant defective in 2-O-sulfation of iduronic acid. The mutant, pgsF-17, was identified by a colony blotting assay in which colonies of mutagen-treated cells were replica plated to two disks of polyester cloth. One disk was blotted with 125I-labeled basic fibroblast growth factor (bFGF) to measure binding to cell surface proteoglycans. The other disk was incubated with 35SO4 to measure proteoglycan biosynthesis. Autoradiography revealed a colony that did not bind 125I-bFGF, but incorporated 35SO4 normally (mutant pgsF-17). Complete deaminative cleavage of heparan sulfate revealed that material from pgsF-17 lacked IdUA(2OSO3)-GlcNSO3 and IdUA(2OSO3)-GlcNSO3(6OSO3), but contained a higher proportion of glucuronic acid GlcUA-GlcNSO3(6OSO3) and IdUA-GlcNSO3(6OSO3). Assay of the 2-O-sulfotransferase that acts on IdUA residues showed that mutant 17 lacked enzyme activity. Interestingly, the alteration resulted in accumulation of GlcNSO3 groups, suggesting that under normal conditions 2-O-sulfation decreases GlcNAc N-deacetylation/N-sulfation, and that the reactions occur simultaneously. The formation of IdUA and 6-O-sulfated glucosaminyl residues appears to be independent of 2-O-sulfation. pgsF-17 also lacks 2-O-sulfated GlcUA residues, suggesting that the same enzyme is responsible for 2-O-sulfation of IdUA and GlcUA residues. Mutant 17 provides a useful tool for studying the regulation of heparan sulfate biosynthesis and the relationship of heparan sulfate fine structure to its biological function.