Angiopoietins are a family of factors that play important roles in angiogenesis, and their receptor, Tie-2 receptor tyrosine kinase, is expressed primarily by endothelial cells. Three angiopoietins have been identified so far, angiopoietin-1 (Ang-1), angiopietin-2 (Ang-2), and angiopoietin-3 (Ang-3). It has been established that Ang-1 and Tie-2 play essential roles in embryonic angiogenesis. We have demonstrated recently that, unlike Ang-2, Ang-1 binds to the extracellular matrix, which regulates the availability and activity of Ang-1 (Xu, Y., and Yu, Q. (2001) J. Biol. Chem. 276, 34990-34998). However, the role and biochemical characteristics of Ang-3 are unknown. In our current study, we demonstrated that, unlike Ang-1 and Ang-2, Ang-3 is tethered on cell surface via heparan sulfate proteoglycans (HSPGs), especially perlecan. The cell surface-bound Ang-3 is capable of binding to its receptor, Tie-2; suggesting HSPGs concentrate Ang-3 on the cell surface and present Ang-3 to its receptor to elicit specific local reaction. Mutagenesis experiment revealed that the coiled-coil domain of Ang-3 is responsible for its binding to the cell surface. In addition, we demonstrated that the cell surface-bound Ang-3 but not soluble Ang-3 induces retraction and loss of integrity of endothelial monolayer, indicating the binding of Ang-3 to the cell surface via HSPGs is required for this bioactivity of Ang-3.