Cell surface heparan sulfate (HS) proteoglycans are carbohydrate-rich regulators of cell migratory, mitogenic, secretory, and inflammatory activity that bind and present soluble heparin-binding growth factors (e.g., fibroblast growth factor, Wnt, Hh, transforming growth factor beta, amphiregulin, and hepatocyte growth factor) to their respective signaling receptors. We demonstrate that the deglycanated core protein of syndecan-1 (SDC1) and not HS chains nor SDC2 or -4, appears to target the epithelial selective prosecretory mitogen lacritin. An important and novel step in this mechanism is that binding necessitates prior partial or complete removal of HS chains by endogenous heparanase. This limits lacritin activity to sites where heparanase appears to predominate, such as sites of exocrine cell migration, secretion, renewal, and inflammation. Binding is mutually specified by lacritin's C-terminal mitogenic domain and SDC1's N terminus. Heparanase modification of the latter transforms a widely expressed HS proteoglycan into a highly selective surface-binding protein. This novel example of cell specification through extracellular modification of an HS proteoglycan has broad implications in development, homeostasis, and disease.