Mice homozygous for the viable Sl allele steel-Dickie (Sld) are sterile, severely anemic, and black-eyed white. The nature of the Sld mutation was investigated at the molecular level and was found to be due to a 4.0-kilobase intragenic deletion in mast cell growth factor (MGF) genomic sequences, providing conclusive evidence that Sl encodes MGF. As a consequence of this deletion, Sld is only capable of encoding a soluble truncated growth factor that lacks both transmembrane and cytoplasmic domains. Northern analysis indicates that Sld mRNA is expressed at approximately wild-type levels in adult tissues, and yeast expression studies suggest that the Sld protein is as biologically active as wild-type soluble MGF. These studies provide a molecular basis for explaining the Sld phenotype, a description of a germ-line mutation in the transmembrane and cytoplasmic domains of a membrane-bound growth factor, and in vivo evidence for the importance of membrane-bound forms of growth factors in mammalian development.