Recent studies have demonstrated that basic fibroblast growth factor (bFGF) plays a key role in the terminal differentiation of growth plate chondrocytes during endochondral ossification. In this paper we examined the potential role of heparan sulfate in the regulation of the action of basic fibroblast growth factor (bFGF) in the terminal differentiation of rat growth plate chondrocytes. As rat growth plate chondrocytes differentiate in vitro, the percentage of heparitinase-sensitive material decreases. Treatment of growth plate chondrocytes with sodium chlorate, a reversible inhibitor of glycosaminoglycan sulfation, resulted in terminal differentiation of growth plate chondrocytes even in the presence of bFGF at concentrations that normally repress their differentiation. Chlorate treatment in the presence of bFGF resulted in an increase in alkaline phosphatase activity and a decrease in cellular proliferation, both characteristics of the differentiated state. Chlorate treatment also reduced the binding of bFGF to growth plate chondrocytes and this effect could be reversed in a dose-dependent manner by the simultaneous addition of sodium sulfate. The reduced binding was a function of a reduced number of receptors and not a reduced affinity for the receptor. Pretreatment of the growth plate chondrocytes with heparitinase significantly reduced the binding of bFGF to both low- and high-affinity receptors, while pretreatment with chondroitinase ABC had no effect. Finally, addition of exogenous heparin restored bFGF binding to chlorate-treated chondrocytes in a concentration-dependent manner. These results provide evidence that a cell surface heparan sulfate is involved in the binding of bFGF to high-affinity receptors and that a downregulation of this glycosaminoglycan is part of the pathway that leads to terminal differentiation of growth plate chondrocytes.