The transcription factor Runx2 can be controlled by a number of upstream regulators involved in intracellular signaling, including the activation ERK1/2 signaling by fibroblast growth factor-2 (FGF-2). FGFs interact with their cell surface receptors (FGFRs) through an obligate cross-binding interaction with heparan sulfate proteoglycan (HSPG) co-receptors; exogenous HS sugar chains have been shown to potently modulate changes in cell phenotype depending on the stage of tissue differentiation when the HS is harvested, suggesting that HS chain structure and function varies depending on the stage of cell maturity. This study examined the potential of bone-derived heparan sulfate (HS), harvested from differentiating osteoblasts, for the enhancement of preosteoblast growth and differentiation. HS was harvested from conditioned media, cell surface and matrix compartments of postconfluent (differentiating) MC3T3-E1 osteoblasts and dosed back onto preconfluent MC3T3-E1 cells. We show that HS can increase the expression Runx2, ALP, and OPN in preosteoblast cells, suggesting the potential for exogenous HS to shift cells from proliferative to differentiative phenotypes. In line with their structural differences, only HS released into the media was found to co-stimulate the mitogenic effect of FGF-2, whilst exogenous application of all the HSs together with FGF-2 served to increase the expression of OPN. Only the application of cell surface-derived HS triggered a synergistic increase in FGFR1 expression together with FGF-2, although all three HS preparations could trigger transient increases in PI3K, ERK1/2, and stat3 phosphorylation levels. These findings demonstrate that the compartmentally distinct HS species expressed by differentiating MC3T3-E1 cells act in complex ways to coordinate the extracellular conditions that lead to osteoblast differentiation, with the cell surface species coordinating the FGF response. J. Cell. Physiol. 210: 38-50, 2007. ß 2006 The orderly progression of bone stem cells through their precursor stages into mature phenotypes requires a systematic cascade of tissue-specific transcription factors to coordinate the process. Of these transcription factors, Runx2, a member of the runt-related family of transcription factors, has been shown to be essential for both skeletal patterning during embryogenesis and the progression of osteoblast differentiation (Ducy et al