Heparin-binding epidermal growth factor-like growth factor (HB-EGF) transduces mitogenic signals through the EGF receptor (EGFR). There are two forms of HB-EGF, the membrane-anchored form (pro-HB-EGF) and the soluble form (sHB-EGF). We studied the biological activity of pro-HB-EGF by using a model in which pro-HB-EGF-expressing effector cells was co-cultured with EGFR-expressing target cells. The DER cell, an EGFR-expressing derivative of the interleukin-3-dependent hematopoietic 32D cell line, grows well in the presence of EGF or sHB-EGF without IL-3. When DER cells were co-cultured on a monolayer of Vero-H cells overexpressing pro-HB-EGF, growth inhibition and subsequent apoptosis were induced in the DER cells even in the presence of excess amounts of EGF or sHB-EGF. Such growth inhibition of DER cells was abrogated when specific antagonists for pro-HB-EGF were added in the culture medium or when direct contact of DER cells with Vero-H cells was prevented, indicating that pro-HB-EGF is involved in this inhibitory effect. Pro-HB-EGF-induced apoptosis of DER cells was also observed even in the presence of IL-3. This rules out the possibility of simple competition between soluble EGFR ligands and pro-HB-EGF. Moreover, 32D cells expressing EGFR mutant composed of the extracellular and the transmembrane domain of EGFR and the cytoplasmic domain of erythropoietin receptor did not undergo apoptosis by co-culture with Vero-H cells, indicating that the inhibitory signal induced by pro-HB-EGF-expressing Vero-H cells is mediated to DER cells via EGFR and that the cytoplasmic domain of EGFR is essential for pro-HB-EGF-induced apoptosis. From these results, we concluded that pro-HB-EGF has unique biological activity through cell-cell contact that is distinct from the activity of sHB-EGF.