Many immune modulating compounds have been isolated from fungal extracts, but the molecular mechanisms of their action have rarely been elucidated. In this study we isolated a proteoglycan from cultured mycelia of Lentinus lepideus and tested its effects on murine spleen cells. The acidic-polysaccharide fraction was obtained by extraction with hot water followed by purification using DEAE-cellulose anion exchange. The molecular mass of the compound was determined by Sepharose CL-4B gel filtration to be approximately 47 kDa. When cultured in the presence of the compound, spleen cells from C3H mice underwent rapid cell proliferation and cell aggregation. Treatment with the compound also caused a 10-fold increase in [3H]-thymidine incorporation compared to a control, confirming cell proliferation. Flow cytometry analysis indicated that the affected cell population was mainly B cells. As one approach to understanding the molecular mechanism of this action, we investigated the effects of the compound on cellular transcription factors which are known to control the proliferation of immune cells. Using gel retardation assays, we found that the compound significantly activated NF-kappa B but not AP-1 in spleen cells. Taken together, the data suggest that the proteoglycan compound is a biological response modifier that stimulates B cell proliferation, probably by regulating cellular transcription factors such as NF-kappa B.