Perlecan is a large multidomain proteoglycan that is essential for normal cartilage development. In this study, perlecan was localized in the pericellular matrix of hypertrophic chondrocytes in developing human cartilage rudiments. Perlecan immunopurified from medium conditioned by cultured human fetal chondrocytes was found to be substituted with heparan sulfate (HS), chondroitin sulfate (CS), and keratan sulfate (KS). Ligand and carbohydrate engagement (LACE) assays demonstrated that immunopurified chondrocyte-derived perlecan formed HS-dependent ternary complexes with fibroblast growth factor (FGF) 2 and either FGF receptors (FGFRs) 1 or 3; however, these complexes were not biologically active in the BaF32 cell system. Chondrocyte-derived perlecan also formed HS-dependent ternary complexes with FGF18 and FGFR3. The proliferation of BaF32 cells expressing FGFR3 was promoted by chondrocyte-derived perlecan in the presence of FGF18, and this activity was reduced by digestion of the HS with either heparinase III or mammalian heparanase. These data suggest that FGF2 and -18 bind to discrete structures on the HS chains attached to chondrocyte-derived perlecan which modulate the growth factor activities. The presence and activity of mammalian heparanase may be important in the turnover of HS and subsequent signaling required for the establishment and maintenance of functional osteo-chondral junctions in long bone growth.