The keratinocyte growth factor (KGF or FGF-7) is unique among its family members both in its target cell specificity and its inhibition by the addition of heparin and the native heparan-sulfate proteoglycan (HSPG), glypican-1 in cells expressing endogenous HSPGs. FGF-1, which binds the FGF-7 receptor with a similar affinity as FGF-7, is stimulated by both molecules. In the present study, we investigated the modulation of FGF-7 activities by heparin and glypican-1 in HS-free background utilizing either HS-deficient cells expressing the FGF-7 receptor (designated BaF/KGFR cells) or soluble extracellular domain of the receptor. At physiological concentrations of FGF-7, heparin was required for high affinity receptor binding and for signaling in BaF/KGFR cells. In contrast, binding of FGF-7 to the soluble form of the receptor did not require heparin. However, high concentrations of heparin inhibited the binding of FGF-7 to both the cell surface and the soluble receptor, similar to the reported effect of heparin in cells expressing endogenous HSPGs. The difference in heparin dependence for high affinity interaction between the cell surface and soluble receptor may be due to other molecule(s) present on cell surfaces. Glypican-1 differed from heparin in that it stimulated FGF-1 but not FGF-7 activities in BaF/KGFR cells. Glypican-1 abrogated the stimulatory effect of heparin, and heparin reversed the inhibitory effect of glypican-1, indicating that this HSPG inhibits FGF-7 activities by acting, most likely, as a competitive inhibitor of stimulatory HSPG species for FGF-7. The regulatory effect of glypican-1 is mediated at the level of interaction with the growth factor as glypican-1 did not bind the KGFR. The effect of heparin and glypican-1 on FGF-1 and FGF-7 oligomerization was studied employing high and physiological concentrations of growth factors. We did not find a correlation between the effects of these glycosaminoglycans on FGFs biological activity and oligomerization. Altogether, our findings argue against the heparin-linked dimer presentation model as key in FGFR activation, and support the notion that HSPGs primarily affect high affinity interaction of FGFs with their receptors.