Heparin-binding epidermal growth factor-like growth factor (HB-EGF), whose cDNA has a predicted 208-codon open reading frame, is synthesized as a membrane-spanning precursor that is processed to release mature mitogenic proteins of approximately 73-87 amino acids in length. Previous work has focused on the structural and biological properties of secreted HB-EGF. In this study, human recombinant transmembrane HB-EGF, produced by expression of HB-EGF1-208 cDNA in a baculovirus system, has been isolated, purified, and characterized structurally and biologically. Two isoforms of transmembrane HB-EGF (HB-EGFTM) were purified from membrane fractions of infected insect cells by a combination of heparin affinity chromatography and reversed-phase high performance liquid chromatography. The isoform designated as HB-EGFTM-1, a 21.5-kDa protein, yielded no N-terminal sequence, suggesting that it is N-terminally blocked. However, HB-EGFTM-II, a 24-kDa protein, was N-terminally sequenced and found to be initiated at Asp63 in the 208-amino acid residue primary translation product. This N terminus is the same as that determined for a 18-kDa isoform of secreted HB-EGF purified from the conditioned medium of insect cells expressing HB-EGF1-149 cDNA and is also identical to the N terminus of the longest form of secreted HB-EGF initially purified from human macrophage-like U-937 cell conditioned medium. HB-EGFTM-II cross-reacted on a Western blot with an antibody directed against the 16 C-terminal amino acids of the cytoplasmic tail of HB-EGF, indicating that it contains a putative transmembrane domain. HB-EGFTM-II was bioactive and stimulated the proliferation of BALB/c 3T3 cells and smooth muscle cells and the motility of smooth muscle cells, albeit with approximately 10-25% of the specific activity of secreted HB-EGF isoforms. We concluded that transmembrane HB-EGF is bioactive when isolated, consistent with the possibility of its functioning as a juxtacrine growth factor when still tethered to the cell.