A protein kinase capable of phosphorylating basic fibroblast growth factor (FGF) can be localized on the outer cell surface of human hepatoma cells (SK-Hep cells). The addition of [gamma-32P]ATP, but not H3(32)PO4, results in a rapid (less than 10 min) incorporation of 32P into exogenously added basic FGF. The reaction is time and concentration dependent (apparent Km, 170 nM) and is stimulated by the addition of cAMP (EC50, 0.5 microM), but not the phorbol ester 12-O-tetradecanoyl-phorbol-13-acetate. There is also no tyrosine protein kinase detected on the cell surface. The inhibition of basic FGF binding to its low and/or high affinity sites decreases the phosphorylation of basic FGF by the ecto-protein kinase. Accordingly, pretreatment of cells with heparinase for 30 min or coincubation with heparin (0.1-10 micrograms/ml) decreases phosphorylation in a dose-dependent manner. Furthermore, the addition of a nonphosphorylatable peptide analog of basic FGF ([Val112] basic FGF-(106-146)NH2) that can compete with basic FGF binding to cells prevents the phosphorylation of basic FGF. Together, these observations suggest that 1) exogenous basic FGF must associate with its low and/or high affinity binding sites to be phosphorylated, and 2) the kinase is cAMP dependent and associated with the outer cell surface, and support the hypothesis that phosphorylation may regulate the activity and/or bioavailability of the growth factor.