Dermatopontin, a recently found low-molecular-mass component of the extracellular matrix, was studied for its interaction with decorin and transforming growth factor beta (TGF-beta) and its influence on TGF-beta bioactivity. Dermatopontin reacted with decorin with an apparent Kd of 100 nM in a solid-phase assay. Dermatopontin inhibited the formation of the decorin-TGF-beta1 complex. Decorin also competed with dermatopontin for the binding of this cytokine. The dermatopontin-decorin complex bound 3-fold more TGF-beta1 than did each component individually, and binding was inhibited more strongly by decorin preincubated with dermatopontin than by dermatopontin or decorin alone. Dermatopontin augmented the biological activity of TGF-beta1, as analysed by the expression of luciferase in mink lung epithelial cells transfected with a plasminogen activator inhibitor-promoter-luciferase construct, although dermatopontin itself did not show apparent induction of luciferase. Dermatopontin showed weak inhibitory activity on the proliferation of mink lung epithelial cells, and it enhanced the growth-inhibitory activity of TGF-beta on these cells. Thus dermatopontin increases the cellular response to TGF-beta. These findings strongly suggest that dermatopontin modifies the behaviour of TGF-beta through interaction with decorin in the microenvironment of the extracellular matrix in vivo.