Apolipoprotein E (apoE) is known to inhibit cell proliferation; however, the mechanism of this inhibition is not clear. We recently showed that apoE stimulates endothelial production of heparan sulfate (HS) enriched in heparin-like sequences. Because heparin and HS are potent inhibitors of smooth muscle cell (SMC) proliferation, in this study we determined apoE effects on SMC HS production and cell growth. In confluent SMCs, apoE (10 microg/ml) increased (35)SO(4) incorporation into PG in media by 25-30%. The increase in the medium was exclusively due to an increase in HSPGs (2.2-fold), and apoE did not alter chondroitin and dermatan sulfate proteoglycans. In proliferating SMCs, apoE inhibited [(3)H]thymidine incorporation into DNA by 50%; however, despite decreasing cell number, apoE increased the ratio of (35)SO(4) to [(3)H]thymidine from 2 to 3.6, suggesting increased HS per cell. Purified HSPGs from apoE-stimulated cells inhibited cell proliferation in the absence of apoE. ApoE did not inhibit proliferation of endothelial cells, which are resistant to heparin inhibition. Analysis of the conditioned medium from apoE-stimulated cells revealed that the HSPG increase was in perlecan and that apoE also stimulated perlecan mRNA expression by >2-fold. The ability of apoE isoforms to inhibit cell proliferation correlated with their ability to stimulate perlecan expression. An anti-perlecan antibody completely abrogated the antiproliferative effect of apoE. Thus, these data show that perlecan is a potent inhibitor of SMC proliferation and is required to mediate the antiproliferative effect of apoE. Because other growth modulators also regulate perlecan expression, this may be a key pathway in the regulation of SMC growth.