The proteoglycan form of macrophage colony-stimulating factor (PG-M-CSF), but not M-CSF with a molecular weight of 85 kD (85-kD M-CSF), bound to immobilized basic fibroblast growth factor (bFGF), and, conversely, bFGF bound to immobilized PG-M-CSF, but not to the 85-kD M-CSF. PG-M-CSF has an additional amino acid sequence at its carboxyl terminus (part of a precursor sequence that is removed in 85-kD M-CSF by proteolytic processing) and it has one or two chondroitin sulfate glycosaminoglycan chains at the carboxyl terminus. Enzymatic removal of the chondroitin sulfate chain from PG-M-CSF had no effect on the binding between PG-M-CSF and bFGF. Ligand blotting analysis with radioiodinated bFGF showed that bFGF specifically bound to the polypeptide that corresponded to the carboxyl terminus of PG-M-CSF and was produced in Escherichia coli transfected with its gene. The exogeneous addition of heparan sulfate, which has strong affinity for bFGF, efficiently inhibited the binding between PG-M-CSF and bFGF. These results show that PG-M-CSF binds bFGF through its carboxyl terminal peptide and that the binding sites for PG-M-CSF and heparan sulfate on bFGF are located close together. PG-M-CSF also significantly reduced the mitogenic action of bFGF on Balb/c 3T3 mouse fibroblastic cells. Therefore, we conclude that PG-M-CSF not only binds bFGF, but also neutralizes the activity of the growth factor.