Secreted forms of macrophage colony-stimulating factor (M-CSF or CSF-1) are generated by proteolytic cleavage of membrane-bound glycoprotein precursors. Alternatively spliced transcripts of the human CSF-1 gene encode at least two different transmembrane precursors that are differentially processed in mammalian expression systems. The larger precursor rapidly undergoes proteolysis to yield the secreted growth factor and does not give rise to forms of CSF-1 detected on the cell surface. By contrast, the smaller human CSF-1 precursor is stably expressed on the plasma membrane where it is inefficiently cleaved to release a soluble molecule. To determine whether the smaller precursor is biologically active on the cell surface, mouse NIH-3T3 fibroblasts expressing the different forms of human CSF-1 were killed by chemical fixation and tested for their ability to support the proliferation of cells that require this growth factor. Only fixed cells expressing human CSF-1 precursors on their surface stimulated the growth in vitro of a murine macrophage cell line or normal mouse bone marrow-derived mononuclear phagocytes. The ability of these nonviable fibroblasts to induce the proliferation of CSF-1-dependent cells was not mediated by release of soluble growth factor, required direct contact with the target cells, and was blocked by neutralizing antiserum to CSF-1. These results demonstrate that the cell surface form of the human CSF-1 precursor is biologically active and indicate that plasma membrane-bound growth factors can functionally interact with receptor-bearing targets by direct cell-cell contact.