The fate of iodinated basic fibroblast growth factor (FGF) after its binding to cultured astrocytes and hippocampal neurons was studied. Autoradiography after light and electron microscopy establishes that, if cells are returned to 37 degrees C, the 125I-basic FGF bound internalizes into vesicles in the cytoplasm, localizes to the perinuclear cytoplasm, and is translocated to chromatin structures of the nucleus. The radiolabeled protein is long-lived, a finding confirmed by biochemical analyses. Polyacrylamide gel electrophoresis and autoradiography of both hippocampal neurons and astrocyte extracts reveal that these cells internalize 125I-basic FGF and then metabolize it to three major heparin-binding peptides with molecular weights of 15.5, 9, and 4 kDa. These peptides are initially detected 16 hr after binding to neurons and 4 hr after binding to astrocytes but are still detectable 48 and 16 hr, respectively, after initial binding (though present at lower levels). Immunoprecipitation with sequence-specific antisera to basic FGF reveals that the 15.5-kDa fragment is generated by cleavage at the carboxyl terminus, that the 9-kDa peptide contains the sequences between residues 30 and 87, and the 4-kDa peptide is a C- terminus fragment containing the sequence of basic FGF(106–120) but without basic FGF(139–146) immunoreactivity. The internalization of basic FGF is required for this processing; the treatment of cells with trypsin and 2 M NaCl at different times after binding can only prevent the metabolism of basic FGF if it is performed immediately after binding. Similarly, WGA, which inhibits basic FGF binding to its high- affinity receptor, prevents the metabolism of basic FGF. The possible significance of a metabolic pathway that is responsible for the processing of basic FGF after its internalization by cells in the CNS is discussed in light of its potential function as a neurotrophic factor.