Hepatocyte growth factor (HGF) is a heparin-binding cytokine that enhances growth, motility, and angiogenesis of many tumor types, including multiple myeloma where it is often highly expressed. However, little is known regarding what controls HGF level and activity in these tumors. Evaluation of bone marrow biopsies from myeloma patients revealed a strong positive correlation between the levels of HGF and heparanase, an endoglucuronidase known to promote aggressive tumor behavior. In vitro, addition of recombinant heparanase to myeloma cells or transfection of myeloma cell lines with the cDNA for heparanase significantly increased tumor cell expression and secretion of biologically active HGF. Shed syndecan-1, whose levels in myeloma are also enhanced by heparanase expression, binds to secreted HGF. This syndecan-1-HGF complex is active as shown by its ability to stimulate paracrine signaling via c-Met, the cell surface receptor for HGF. Surprisingly, heparanase enzyme activity was not required for up-regulation of HGF expression by the tumor cells. This is in contrast to the heparanase-mediated enhanced syndecan-1 shedding, which does require activity of the enzyme. This suggests that two different functional domains within the heparanase enzyme (the enzyme active site and a separate site) contribute to events leading to enhanced HGF signaling. These findings demonstrate a novel mechanism driving the HGF pathway whereby heparanase stimulates an increase in both HGF expression and syndecan-1 shedding to enhance HGF signaling. This work also provides further mechanistic insight into the dynamic role of heparanase in driving aggressive tumor progression.