Heparin-binding EGF-like growth factor (HB-EGF) is a member of the EGF family of growth factors that has a high affinity for heparin and heparan sulfate. While interactions with heparin are thought to modulate the biological activity of HB-EGF, the precise role of the heparin-binding domain has remained unclear. We analyzed the activity of wild-type HB-EGF and a mutant form lacking the heparin-binding domain (DeltaHB) in the presence or absence of heparin. The activity of the EGF-like domain of HB-EGF was determined by measuring binding to diphtheria toxin (DT) as well as the growth factor activity in EGF receptor-expressing cells. The binding affinity of DeltaHB for DT was much higher than that of wild-type HB-EGF in the absence of heparin. The binding affinity of HB-EGF for DT was increased by addition of exogenous heparin and reached the level close to the affinity of DeltaHB, whereas that of DeltaHB was not affected. Moreover, the growth factor activity of DeltaHB was much higher than that of wild-type HB-EGF in the absence of heparin but was not affected by addition of exogenous heparin, whereas HB-EGF had increased growth factor activity with added heparin. These results indicate that the heparin-binding domain suppresses the activity of the EGF-like domain of HB-EGF and that association of heparin with HB-EGF via this domain removes the suppressive effect. Thus, we conclude that the heparin-binding domain serves as a negative regulator of this growth factor.