A Hyal2-type hyaluronidase of Xenopus laevis (Xhyal2) was characterized by molecular cloning, biochemical analysis and ectopic overexpression in embryos. When expressed in Xenopus oocytes, Xhyal2 exists as a soluble protein in the extracellular space and in intercellular compartments as well as being attached to the cell surface through a glycosyl-phosphatidyl-inositol anchor. This enzyme specifically degrades hyaluronan not only at acidic pH values but more slowly also under physiological conditions. Xhyal2 is differentially expressed during embryogenesis. Particularly striking is the high level of expression in the developing brain, the head mesenchyme and the pronephros. Elevated levels of mRNA were also found in endothelial cells which will later form vascular structures. Ectopic overexpression of Xhyal2 in frog embryos causes loss of hyaluronan in the cellular environment. This causes severe defects in the assembly of the highly structured plexus of the vitelline vessels from prevascular endothelial cells. Our data support the notion that the level of Xhyal2 expression determines the organization of the extracellular environment so that cells can merge and/or migrate within an originally impenetrable matrix.