OBJECTIVE: We determined if the epidermal growth factor receptor ligand HB-EGF is produced in cartilage and if it regulates chondrocyte anabolic or catabolic activity. METHODS: HB-EGF expression was measured by quantitative PCR using RNA isolated from mouse knee joint tissues and from normal and osteoarthritis (OA) human chondrocytes. Immunohistochemistry was performed on normal and OA human cartilage and meniscus sections. Cultured chondrocytes were treated with fibronectin fragments (FN-f) as a catabolic stimulus and osteogenic protein 1 (OP-1) as an anabolic stimulus. Effects of HB-EGF on cell signaling were analyzed by immunoblotting of selected signaling proteins. MMP-13 was measured in conditioned media, proteoglycan synthesis was measured by sulfate incorporation, and matrix gene expression by quantitative PCR. RESULTS: HB-EGF expression was increased in 12-month old mice at 8 weeks after surgery to induce OA and increased amounts of HB-EGF were noted in human articular cartilage from OA knees. FN-f stimulated chondrocyte HB-EGF expression and HB-EGF stimulated chondrocyte MMP-13 production. However, HB-EGF was not required for FN-f stimulation of MMP-13 production. HB-EGF activated the ERK and p38 MAP kinases and stimulated phosphorylation of Smad1 at an inhibitory serine site which was associated with inhibition of OP-1 mediated proteoglycan synthesis and reduced aggrecan (ACAN) but not COL2A1 expression. CONCLUSION: HB-EGF is a new factor identified in OA cartilage that promotes chondrocyte catabolic activity while inhibiting anabolic activity suggesting it could contribute to the catabolic-anabolic imbalance seen in OA cartilage.