C3H10T1/2 cells differentiate along a chondrogenic pathway when plated onto the extracellular matrix (ECM) protein perlecan (Pln). To identify the region(s) within the large Pln molecule that provides a differentiation signal, recombinant Pln-sequence-based polypeptides representing distinct structural domains were assayed for their ability to promote chondrogenesis in C3H10T1/2 cells. Five distinct domains, along with structural variations, were tested. The N-terminal domain I was tested in two forms (IA and IB) that contain only heparan sulfate (HS) chains or both HS and chondroitin sulfate (CS) chains, respectively. A mutant form of domain I lacking attachment sites for both HS and CS (Pln I(mut)) was tested also. Other constructs consecutively designated Pln domains II, III(A-C), IV(A,B), and V(A,B) were used to complete the structure-function analysis. Cells plated onto Pln IA or Pln IB but no other domain rapidly assembled into cellular aggregates of 40-120 microm on average. Aggregate formation was dependent on the presence of glycosaminoglycan (GAG) chains, because Pln I-based polypeptides lacking GAG chains either by enzymatic removal or mutation of HS/CS attachment sites were inactive. Aggregates formed on GAG-bearing Pln IA stained with Alcian Blue and were recognized by antibodies to collagen type II and aggrecan but were not recognized by an antibody to collagen type X, a marker of chondrocyte hypertrophy. Collectively, these studies indicate that the GAG-bearing domain I of Pln provides a sufficient signal to trigger C3H10T1/2 cells to enter a chondrogenic differentiation pathway. Thus, this matrix proteoglycan (PG) found at sites of cartilage formation in vivo is likely to enhance early stage differentiation induced by soluble chondrogenic factors.