Hedgehog proteins exert critical roles in embryogenesis and require heparan 
sulfate proteoglycans (HS-PGs) for action. Indian hedgehog (Ihh) is produced by 
prehypertrophic chondrocytes in developing long bones and regulates chondrocyte 
proliferation and other events, but it is not known whether it requires HS-PGs 
for function. Because the HS-PG syndecan-3 is preferentially expressed by 
proliferating chondrocytes, we tested whether it mediates Ihh action. Primary 
chick chondrocyte cultures were treated with recombinant Ihh (rIhh-N) in absence 
or presence of heparinase I or syndecan-3 neutralizing antibodies. While rIhh-N 
stimulated proliferation in control cultures, it failed to do so in heparinase- 
or antibody-treated cultures. In reciprocal gain-of-function studies, 
chondrocytes were made to overexpress syndecan-3 by an RCAS viral vector. Cells 
became more responsive to rIhh-N, but even this response was counteracted by 
heparinase or antibody treatment. To complement the in vitro data, RCAS viral 
particles were microinjected in day 4-5 chick wing buds and effects of 
syndecan-3 misexpression were monitored over time. Syndecan-3 misexpression led 
to widespread chondrocyte proliferation and, interestingly, broader expression 
and distribution of Ihh. In addition, the syndecan-3 misexpressing skeletal 
elements were short, remained cartilaginous, lacked osteogenesis, and exhibited 
a markedly reduced expression of collagen X and osteopontin, products 
characteristic of hypertrophic chondrocytes and bone cells. The data are the 
first to indicate that Ihh action in chondrocyte proliferation involves 
syndecan-3 and to identify a specific member of the syndecan family as mediator 
of hedgehog function.