Endostatin, which corresponds to the C-terminal fragment of collagen XVIII, is a potent inhibitor of angiogenesis. Fibroblast growth factor-2 (FGF-2)-induced angiogenesis in the chicken chorioallantoic membrane was inhibited by endostatin, but not by an endostatin mutant R158/270A, lacking heparin-binding ability. Endostatin was internalized by endothelial cells, but not by mouse fibroblasts. Treatment of murine brain endothelial (IBE) cells with endostatin reduced the proportion of cells in S phase, whereas growth-arrested IBE cells in collagen gels treated with endostatin displayed enhanced tubular morphogenesis. IBE cells overexpressing Shb, an adaptor protein implicated in angiostatin-induced apoptosis, displayed elevated apoptosis and decreased tubular morphogenesis in collagen gels in response to endostatin when added together with FGF-2. Induction of apoptosis was dependent on the heparin-binding ability of endostatin and the expression of Shb with a functional Src homology 2 (SH2)-domain. Endostatin treatment for 10 minutes or 24 hours induced tyrosine phosphorylation of Shb and formation of multiprotein complexes. An Shb SH2 domain fusion protein precipitated a 125-kd phosphotyrosyl protein in endostatin-treated cells. The 125-kd component either contained intrinsic tyrosine kinase activity or occurred in complex with a tyrosine kinase. In conclusion, our data show that endostatin induces tyrosine kinase activity and enhanced apoptosis in FGF-treated endothelial cells.