We previously identified HSulf-1 as a down-regulated gene in several tumor types including ovarian, breast, and hepatocellular carcinomas. Loss of HSulf-1, which selectively removes 6-O-sulfate from heparan sulfate, up-regulates heparin-binding growth factor signaling and confers resistance to chemotherapy-induced apoptosis. Here we report that HSulf-1 expression in MDA-MB-468 breast carcinoma clonal lines leads to reduced proliferation in vitro and reduced tumor burden in athymic nude mice in vivo. Additionally, xenografts derived from HSulf-1-expressing stable clones of carcinoma cells showed reduced vessel density, marked necrosis, and apoptosis, indicative of inhibition of angiogenesis. Consistent with this observation, HSulf-1-expressing clonal lines showed reduced staining with the endothelial marker CD31 in Matrigel plug assay, indicating that HSulf-1 expression inhibits angiogenesis. More importantly, HSulf-1 expression in the xenografts was associated with a reduced ability of vascular endothelial cell heparan sulfate to participate in a complex with fibroblast growth factor 2 (FGF-2) and its receptor tyrosine kinase FGF receptor 1c. In vitro, short hairpin RNA-mediated down-regulation of HSulf-1 in human umbilical vein endothelial cells (HUVEC) resulted in an increased proliferation mediated by heparan sulfate-dependent FGF-2, hepatocyte growth factor, and vascular endothelial growth factor 165 (VEGF165) but not by heparan sulfate-independent VEGF121. HSulf-1 down-regulation also enhanced downstream signaling through the extracellular signal-regulated kinase pathway compared with untreated cells. Consistent with the role of heparan sulfate glycosaminoglycan sulfation in VEGF-mediated signaling, treatment of HUVEC cells with chlorate, which inhibits heparan sulfate glycosaminoglycan sulfation and therefore mimics HSulf-1 overexpression, led to an attenuated VEGF-mediated signaling. Collectively, these observations provide the first evidence of a novel mechanism by which HSulf-1 modulates the function of heparan sulfate binding VEGF165 in proliferation and angiogenesis.