Perlecan is a major heparan-sulfate proteoglycan (HSPG) within the basement membrane surrounding skeletal muscle fibers. The C-terminus of its core protein contains three globular domain modules which are also found in laminin and agrin, two proteins that bind to dystroglycan (DG, cranin) on the muscle surface with these modules. In this study, we examined whether perlecan can also bind to DG and is involved in signaling the formation of the neuromuscular junction (NMJ). By labeling cultured muscle cells with a polyclonal anti-perlecan antibody, this protein is found both within the extracellular matrix in a fibrillar network and at the cell surface in a punctate pattern. In Xenopus muscle cells, the cell-surface perlecan is precisely colocalized with DG. Both perlecan and DG are clustered at ACh receptor clusters induced by spinal neurons or by beads coated with HB-GAM, a heparin-binding growth factor. Blot overlay assays have shown that perlecan binds alpha-DG in a calcium and heparin-sensitive manner. Furthermore, perlecan is present in muscle lysate immunoprecipitated with an anti-DG antibody. Immunolabeling also showed colocalization between HB-GAM and perlecan and between HB-GAM and DG. These data suggest that perlecan is anchored to muscle surface via DG-dystrophin complex. Since DG is also a site of agrin binding, the neural agrin secreted by motoneurons during NMJ formation may compete with the pre-existing perlecan for cell surface binding. This competition may result in the presentation of perlecan-bound growth factors such as HB-GAM to effect synaptic induction.