Multiple myeloma is characterized by an accumulation of malignant plasma cells in the bone marrow coupled with an altered balance of osteoclasts and osteoblasts, leading to lytic bone disease. Although some of the cytokines driving this process have been characterized, little is known about the negative regulators. We show that syndecan-1 (CD 138), a heparan sulfate proteoglycan, expressed on and actively shed from the surface of most myeloma cells, induces apoptosis and inhibits the growth of myeloma tumor cells and also mediates decreased osteoclast and increased osteoblast differentiation. The addition of intact purified syndecan-1 ectodomain (1 to 6 nmol/L) to myeloma cell lines in culture leads to induction of apoptosis and dose- dependent growth inhibition, with concurrent downregulation of cyclin D1. The addition of purified syndecan-1 in picomolar concentrations to bona marrow cells in culture leads to a dose-dependent decrease in osteoclastogenesis and a smaller increase in osteoblastogenesis. In contrast to the effect on myeloma cella, the effect of syndecan-1 on osteoclastogenesis only requires the syndecan-1 heparan sure chains and not the intact ectodomain, suggesting that syndecan's effect on myeloma and bone cells occurs through different mechanisms. When injected in severe combined immune deficient (scid) mice, control-transfected myeloma cells (ARH-77 cells) expressing little syndecan- 1 readily form tumors, leading to hind limb paralysis and lytic bone disease. However, after the injection of syndecan-1-transfected ARH-77 cells, the development of disease-related morbidity and lytic bone disease is significantly inhibited. Taken together, our data demonstrate, both in vitro and in vivo, that syndecan-1 has a significant beneficial effect on the behavior of both myeloma and bone cella end therefore may represent one of the central molecules in the regulation of myeloma pathobiology.