Proliferation of neural stem cells in the embryonic cerebral cortex is regulated by many growth factors and their receptors. Among the key molecules stimulating stem cell proliferation are FGF-2 and the FGF receptor-1. This ligand-receptor system is highly dependent on the surrounding heparan sulfates. We have found that heparin-binding growth-associated molecule (HB-GAM, also designated as pleiotrophin) regulates neural stem cell proliferation in vivo and in vitro. Deficiency of HB-GAM results in a pronounced, up to 50% increase in neuronal density in the adult mouse cerebral cortex. This phenotype arises during cortical neurogenesis, when HB-GAM knockout embryos display an enhanced proliferation rate as compared to wild-type embryos. Further, our in vitro studies show that exogenously added HB-GAM inhibits formation and growth of FGF-2, but not EGF, stimulated neurospheres, restricts the number of nestin-positive neural stem cells, and inhibits FGF receptor phosphorylation. We propose that HB-GAM functions as an endogenous inhibitor of FGF-2 in stem cell proliferation in the developing cortex.