Soluble CD44 proteins generated by proteolytic cleavage or aberrant intron retention have been shown to antagonize the ligand binding activity of the corresponding cell surface receptor, inducing apoptosis and inhibiting tumor growth. Interestingly, such findings appear to contradict recent studies demonstrating a correlation between the presence of high levels of soluble CD44 in the serum of cancer patients and poor prognosis. In the present study, we report the cloning of a novel, naturally occurring, differentially expressed, soluble CD44 isoform, designated CD44RC, which, in contrast to previously described soluble CD44 proteins, can dramatically enhance the hyaluronan binding activity of cell surface CD44. Sequence analysis suggests that CD44RC is generated by an alternative splicing event in which the 3' end of CD44 exon 2 is spliced into an internal splice acceptor site present within exon 18, altering reading frame and giving rise to a soluble protein with a unique COOH terminus. Functional studies suggest that CD44RC enhances hyaluronan binding by adhering to chondroitin sulfate side-chains attached to cell surface CD44, generating a multivalent complex with increased avidity for hyaluronan.