Endostatin, the C-terminal fragment of collagen XVIII, is a potent inhibitor of angiogenesis. Observations that endostatin inhibits endothelial cell migration and induces disassembly of the actin cytoskeleton provide putative cellular mechanisms for this effect. To understand the mechanisms of endostatin-induced intracellular signaling, we analyzed the association of recombinant endostatin with endothelial cell lipid rafts and the roles of its heparin- and integrin-binding properties in this interaction. We observed that a fraction of cell surface-bound endostatin partitioned in low density membrane raft fractions together with caveolin-1. Heparinase treatment of cells prevented the recruitment of endostatin to the lipid rafts but did not affect the association of endostatin with the non-raft fraction, whereas preincubation of endostatin with soluble alpha5beta1 integrin prevented the association of endostatin with the endothelial cell membrane. Endostatin treatment induced recruitment of alpha5beta1 integrin into the raft fraction via a heparan sulfate proteoglycan-dependent mechanism. Subsequently, through alpha5beta1 integrin, heparan sulfate, and lipid raft-mediated interactions, endostatin induced Src-dependent activation of p190RhoGAP with concomitant decrease in RhoA activity and disassembly of actin stress fibers and focal adhesions. These observations provide a cell biological mechanism, which plausibly explains the anti-angiogenic mechanisms of endostatin in vivo.