Basic fibroblast growth factor (FGF-2) functions as a natural inducer of mesoderm, regulator of cell differentiation and autocrine modulator of cell growth and transformation. The FGF-2 signals are transduced through receptors with intrinsic protein tyrosine kinase activity. However, receptor binding and activation is governed by extracellular matrix, cell surface or soluble proteoglycans. This paper focuses on the role of proteoglycans synthesized by embryonic cells, embryoglycans, in FGF-2 signaling via FGF receptor-1 (FGFR-1). We found that embryoglycan ectodomain Lewis X, analog of developmentally regulated embryonic cell surface epitope TEC 1, promotes oligomerization of FGF-2 in the cell free chemical crosslinking. In vitro assays show that a large molar excess of extracellular Lewis X does not inhibit binding of FGF-2 to embryonic stem (ES) cells, but prevents the mitogenic effect of FGF-2. Western blot analysis of ES cells revealed the presence of abundant 52 kDa and trace amounts of 67 and 125 kDa isoforms of FGFR-1. However, none of these isoforms undergo any detectable changes in tyrosine phosphorylation under the conditions that modulate the mitogenic effect of FGF-2. Rather, a primary substrate of all receptor tyrosine kinases, phospholipase C gamma (PLC gamma), is activated by both FGF-2 and Lewis X. The combination, FGF-2 plus Lewis X, leads to weak inhibition, when compared with the effects of FGF-2 and Lewis X, respectively. In accordance, the level of phosphorylation of non-receptor tyrosine kinase c-Src is reduced in a reversed pattern to PLC(gamma). Furthermore, in this particular cell type we show the presence of activated forms of extracellular signal-related kinase (ERK) in all nontreated and treated cells. These findings demonstrate that embryoglycan ectodomains may act as negative regulators of FGF-2-induced ES cell proliferation, most likely through the FGFR-1-independent signaling pathway.