We previously identified a phosphatidylinositol-specific phospholipase c (PI-PLC)-releasable heparan sulfate proteoglycan (HSPG) on the surface of rat Schwann cells (D. J. Carey and R. C. Stahl, J. Cell Biol. 111, 2053-2062, 1990). The present study was carried out to investigate the localization and processing of this proteoglycan. The HSPG was synthesized as a PI-PLC-releasable form that was shed into the culture medium with a T1/2 of 17 h. Degradation of the HSPG was negligible. The HSPG was present on the surface of Schwann cells on small (100-200 nm diameter) cylindrical membrane extensions that resembled filopodia. In neonatal peripheral nerve, brain, heart, and striated muscle the HSPG was found to be localized principally to regions of the cell surface that were in contact with basement membranes. Northern blot analysis with cDNA coding for rat glypican (a previously described human fibroblast HSPG) demonstrated abundant expression of glypican mRNA in Schwann cells. Antibodies made against recombinant rat glypican core protein immunoprecipitated the Schwann cell PI-PLC-releasable HSPG. These data demonstrate that the Schwann cell HSPG is rat glypican and support the hypothesis that this proteoglycan functions in cell-extracellular matrix interactions.