Two small interstitial dermatan sulfate-containing proteoglycans, biglycan and decorin, are present in extracellular matrices of skin, tendon, ligament, and cartilage. We investigated the effects of biglycan and decorin on the inhibition of alpha-thrombin by the serine proteinase inhibitor heparin cofactor II. In solution, heparin cofactor II inhibition of thrombin is accelerated by intact biglycan or decorin and by the dermatan sulfate-containing glycosaminoglycan (GAG) chains prepared from the proteoglycans, while core protein from cartilage biglycan had no effect. L-Iduronic acid-rich skin decorin and GAG chains had a greater accelerating effect than proteoglycan and GAG chains from cartilage that had lower L-iduronic acid content. Treatment of skin decorin and GAG chains with chondroitinase ABC totally eliminated the ability of these compounds to accelerate thrombin inhibition by heparin cofactor II suggesting that dermatan sulfate was responsible for this action. Both biglycan and decorin bound to type V collagen in a saturable and specific manner. Biglycan, decorin, and core protein from biglycan competed for decorin binding to the type V collagen, while only the intact proteoglycans competed for biglycan binding. When bound to type V collagen, both biglycan and decorin accelerated the heparin cofactor II/thrombin inhibition reaction as efficiently as the proteoglycans in solution. Our results demonstrate that heparin cofactor II in the presence of biglycan or decorin bound to type V collagen provides a "thromboresistant surface," further suggesting a physiological function for these proteins in regulating the extravascular activities of thrombin.