The heparan sulfate proteoglycan (HSPGs) is a components of the extracellular matrix of skeletal muscle that is concentrated at the neuromuscular junction (NMJ). Recent studies have suggested that HSPG, together with its bound peptide growth factors, plays important roles in autocrine or paracrine types of regulation of cell growth and differentiation. Heparin-binding growth-associated molecule (HB-GAM; also known as pleiotrophin, or p18) is a newly discovered HSPG-bound factor that is expressed at high levels in the developing CNS and PNS. In this study, we examined the role of this factor in NMJ development by examining its relationship to the formation of ACh receptor (AChR) clusters. Using an antibody against recombinant rat brain HB-GAM, we found that this protein is present prominently on the surface of cultured Xenopus myotomal muscle cells by immunocytochemistry. It is associated with HSPGs as evidenced by the fact that heparin and heparinase treatment greatly diminished the antibody labeling. HB-GAM is concentrated at preexisting AChR hot spots as well as at those induced by polystyrene beads. In addition, this molecule is also concentrated at AChR clusters induced by spinal cord neurons in nerve- muscle cocultures. To assess its function in synaptic induction, we applied recombinant HB-GAM-coated beads to cultured muscle cells to effect its focal presentation. Over 70% of these beads induced the formation of AChR clusters as shown by fluorescent alpha-bungarotoxin labeling. Furthermore, bath application of HB-GAM inhibited the nerve- induced formation of AChR clusters. Thus, HB-GAM is an endogenous muscle-derived factor that may be a component of the molecular mechanism in postsynaptic induction.