ABSTRACT Midkine (MK) and heparin binding-growth associated molecule (HB-GAM or pleiotrophin), constitute a new family of heparin-binding proteins implicated in the regulation of growth and differentiation (T. Muramatsu (1993)Int. J. Dev. Biol. 37, 183-188). We used affinity-purified antibodies against MK and HB-GAM to analyze their distribution during mouse embryonic development. From 9 to 14.5 day post-coitum (dpc), both proteins were detected in central and peripheral nervous systems, facial processes, limb buds, sense organs, respiratory, digestive, urogenital, and skeletal systems. MK and HB-GAM were often localized on the surface of differentiating cells and in basement membranes of organs undergoing epithelial-mesenchymal interactions. The levels of MK protein decreased considerably in the 16.5 dpc embryo, whereas HB-GAM staining persisted in many tissues. Our in situ hybridization results revealed a widespread expression of MK transcripts that was not always consistent with the distribution of MK protein in developing tissues. In many epithelio-mesenchymal organs MK and HB-GAM were codistributed with syndecan-1, a cell surface proteoglycan. In limb buds and facial processes, MK, HB-GAM, and syndecan-1 were localized to the apical epithelium and the adjacent proliferating mesenchyme. Both MK and HB-GAM bound syndecan-1 in solid-phase assays in a heparan sulfate-dependent manner. The biological effects of MK and HB-GAM on limb and facial mesenchyme were studied in vitro by application of beads preloaded with the proteins. Neither MK nor HB-GAM stimulated mesenchymal cell proliferation or induced syndecan-1 expression. Taken together these results indicate that MK and HB-GAM may play regulatory roles in differentiation and morphogenesis of the vertebrate embryo, particularly in epithelio-mesenchymal organs, and suggest molecular interactions with syndecan-1.