Ectopic expression of decorin induces profound cytostatic effects in transformed cells with diverse histogenetic backgrounds. The mechanism of action has only recently begun to be elucidated. Exogenous decorin activates the epidermal growth factor (EGF) receptor, thereby triggering a signaling cascade that leads to phosphorylation of mitogen-activated protein (MAP) kinase, induction of p21, and growth suppression. In this study we demonstrate a direct interaction of decorin with the EGF receptor. Binding of decorin induces dimerization of the EGF receptor and rapid and sustained phosphorylation of MAP kinase in squamous carcinoma cells. In a cell-free system, decorin induces autophosphorylation of purified EGF receptor by activating the receptor tyrosine kinase and can also act as a substrate for the EGF receptor kinase itself. Using radioligand binding assays we show that both immobilized and soluble decorin bind to the EGF receptor ectodomain or to purified EGF receptor. The binding is mediated by the protein core and has relatively low affinity (Kd approximately 87 nM). Thus, decorin should be considered as a novel biological ligand for the EGF receptor, an interaction that could regulate cell growth during remodeling and cancer growth.