Syndecan-1 is a major heparan sulfate proteoglycan of the epidermis. Its expression is strongly induced in migrating and proliferating keratinocytes during wound healing and, on the other hand, diminished or lost in invasive squamous cell carcinoma. We have recently found in the syndecan-1 gene an enhancer (fibroblast growth factor-inducible response element (FiRE)) that activates gene expression in wound edge keratinocytes (Jaakkola, P., Kontusaari, S., Kauppi, T., Mä ä ttä , A., and Jalkanen, M. (1998) FASEB J. 12, 959 -969). Now, we demonstrate that the activation of this enhancer by keratinocyte growth factor (KGF) is modulated by the components of the extracellular matrix (ECM). MCA-3D mouse immortal keratinocytes growing on fibrillar collagen failed to activate FiRE and subsequently to induce syndecan-1 in response to KGF. The same cells growing on fibronectin or laminin, however, increased FiREdependent reporter gene expression upon KGF treatment. The inhibition of the KGF induction by collagen appears to be specific for signaling to FiRE, as the increase in cell proliferation by KGF was not affected. The effect was selective to KGF, as EGF-induction was independent on ECM composition. Changes in the transcription factor binding were not involved in the differential activation of FiRE, as the levels and composition of the AP-1 complexes were unchanged. However, application of anisomycin, an activator of Jun amino-terminal kinase, resulted in a lower response in cells growing on collagen compared with fibronectin. These results indicate that the composition of ECM and availability of growth factors can play a role in the epidermal regulation of syndecan-1 expression and that FiRE is a novel target for gene regulation by the extracellular matrix.