High-molecular-weight splice variants of the CD44 transmembrane protein family have been implicated in tumorigenesis and metastasis formation. By contrast, in certain tumors--for example, Burkitt's lymphoma, neuroblastomas, and prostate cancer--loss of CD44 expression seems to accompany transformation. Here we describe two modes of action of CD44 proteins. They can bind growth factors and present them to their authentic high-affinity receptors, and thus promote proliferation and invasiveness of cells. Under these conditions the CD44 proteins recruit ERM proteins--for example, ezrin or moesin--to their cytoplasmic tails, thereby producing links to the cytoskeleton. This mode of action could account for the tumor-promoting action of CD44 proteins. The second mode of action of CD44 proteins comes into play when cells reach confluent growth conditions. Under specific conditions, binding of another ligand, the ECM component hyaluronate, leads to the activation and binding to the CD44 cytoplasmic tail of the tumor suppressor protein merlin. The activation of merlin confers growth arrest, so-called contact inhibition. This function of CD44 proteins defines them as tumor suppressors. The type of action of CD44 on a given cell will depend on the isoform pattern of CD44 expressed, on the cellular equipment with ERM protein members, on the nature of the ECM, and on yet-unknown conditions.