Simpson-Golabi-Behmel syndrome (SGBS) is an X-linked condition shown to be the result of deletions of the glypican-3 (GPC3) gene. GPC3 is a proteoglycan localized to the cell membrane via a glycosylphosphatidyl-inositol (GPI) anchor. To further elucidate the GPC3 function(s), we have screened various cell lines for proteins that interact with GPC3, resulting in the isolation of a 115 kDa protein, identified as CD26. The interaction occurred with both the glycosylated and unglycosylated forms of GPC3 and led to the inhibition of CD26 peptidase activity. Moreover, introduction of CD26 into Cos-1 cells was accompanied by the up-regulation of cell growth, while inclusion of recombinant GPC3 in the media reduced the growth of CD26 transfected Cos-1 cells, drastically. Furthermore, HepG2 C3A cells containing CD26 underwent apoptosis in the presence of recombinant GPC3 in both concentration and time-dependant manner. In light of the fact that inhibition of CD26 reduces the rate of cell proliferation, we propose that a number of physical findings observed in SGBS patients may be a consequence of a direct interaction of GPC3 with CD26. Furthermore, GPC3 without the GPI anchor is capable of inducing apoptosis indicating that neither the GPI anchor nor the membrane attachment is required for apoptosis induction.