Basic fibroblast growth factor (FGF-2) is normally expressed as a cell-associated protein, and accordingly it is not clear how it exerts its action on target cells in vivo. It has been proposed that cells release, by death or other mechanisms, small amounts of FGF-2 that then acts in an autocrine manner. To address the question of whether it is necessary that FGF-2 remain cell associated or needs to be secreted from cells to have biological activity, we expressed the 18-kDa form of FGF-2 in primary fibroblasts as a cell-associated (FGF-2-B) or as a secreted (FGF-2-S) protein. FGF-2 protein is detected in cell lysates and membrane fractions of both cell types, whereas it is present in significant amounts only in the conditioned medium of FGF-2-S cells. No FGF-2 is detected in control (untransfected) cells. FGF-2-S cells also grow faster than the control of FGF-2-B cells. Yet, when evaluated for their ability to promote the survival of embryonic hippocampal neurons in vitro, both the cell types are active, establishing the activity of the transgene product. We conclude that FGF-2 is active when engineered to be expressed as a cell-associated form or secreted from cells.