Decorin is a multifunctional proteoglycan that is expressed by sprouting endothelial cells. Its expression supports capillary formation and cell survival. Previously, it was shown that some effects of decorin are mediated by protein kinase B and the cyclin-dependent kinase inhibitor, p21. However, the cell surface receptor responsible for these effects was unknown. We demonstrate that decorin binds to the insulin-like growth factor-I (IGF-I) receptor on endothelial cells with an affinity in the nanomolar range (K(D) = 18 nm), which is comparable with IGF-I (K(D) = 1.2 nm). Furthermore, decorin can bind IGF-I itself, but with a lower affinity (K(D) = 190 nm) than classical IGF-I-binding proteins. Decorin addition causes IGF-I receptor phosphorylation and activation, which is followed by receptor down-regulation. These effects are caused by the core protein of decorin, and the binding region could be mapped to the N terminus of the molecule. The physiological relevance of the decorin/IGF-I receptor interaction was corroborated in two animal models (e.g. inflammatory angiogenesis in the cornea and unilateral ureteral obstruction). In both models the IGF-I receptor was up-regulated in decorin-deficient mice compared with controls and the up-regulation could not compensate the decorin deficiency in the disease models. These data indicate that decorin is an important player in the IGF system and its loss cannot fully be compensated in different types of diseases.