The outgrowth of the mesoderm of the developing limb bud in response to the apical ectodermal ridge (AER) is mediated at least in part by members of the FGF family. Recent studies have indicated that FGFs need to interact with heparan sulfate proteoglycans in order to bind to and activate their specific cell surface receptors. Syndecan-3 is an integral membrane heparan sulfate proteoglycan that is highly expressed by the distal mesodermal cells of the chick limb bud that are undergoing proliferation and outgrowth in response to the AER. Here we report that maintenance of high-level syndecan-3 expression by the subridge mesoderm of the chick limb bud is directly or indirectly dependent on the AER, since its expression is severely impaired in the distal mesoderm of the limb buds of limbless and wingless mutant embryos which lack functional AERs capable of directing the outgrowth of limb mesoderm. We have also found that exogenous FGF-2 maintains a domain of high-level syndecan-3 expression in the outgrowing mesodermal cells of explants of the posterior mesoderm of normal limb buds cultured in the absence of the AER and in the outgrowing subapical mesoderm of explants of limbless mutant limb buds which lack a functional AER. These results suggest that the domain of high-level syndecan-3 expression in the subridge mesoderm of normal limb buds is maintained by FGFs produced by the AER. Finally, we report that polyclonal antibodies against a syndecan-3 fusion protein inhibit the ability of FGF-2 to promote the proliferation and outgrowth of the posterior subridge mesoderm of limb buds cultured in the absence of the AER. These results suggest that syndecan-3 plays an essential role in limb outgrowth by mediating the interaction of FGFs produced by the AER with the underlying mesoderm of the limb bud.