The amyloid protein precursor (APP) of Alzheimer's disease was found to bind saturably (Kd = 60 nM) to embryonic chick brain extracellular matrix (ECM). The binding of APP to ECM was not inhibited by 10 micrograms/ml heparin or heparan sulfate. However, pretreatment of cells with 1 mM 4-methylumbelliferyl-beta-D-xyloside, an inhibitor of proteoglycan biosynthesis, reduced the number of APP binding sites on the ECM by 80%. The binding of APP to ECM was also inhibited by pretreatment with chlorate, an inhibitor of glycan sulfation, and heparitinase, which digests the carbohydrate component of heparan sulfate proteoglycans. These results suggest that APP binds with high affinity to one or more heparan sulfate proteoglycans. Acidic and basic fibroblasts growth factor (FGF) also bound to chick ECM. When ECM was incubated with a protease associated with the enzyme AChE (AChE-AP), APP and acidic FGF were released intact from the matrix. The AChE-AP was at least 100-fold more potent in releasing APP from ECM than other trypsin-like proteases (trypsin, plasmin, thrombin). The action of the AChE-AP was inhibited by glia-derived nexin (protease nexin I) and by human brain APP at low nanomolar concentrations. These results suggest that in vivo an AChE-AP may cleave ECM proteins to regulate the availability of soluble APP or other factors bound to the ECM.