Keratinocyte growth factor (KGF) is a newly identified member of the fibroblast growth factor (FGF) family (FGF-7). KGF is expressed by stromal fibroblasts and acts on epithelial cells in a paracrine mode. To facilitate structure/function studies, we utilized the T7 prokaryotic expression system to synthesize this growth factor. Recombinant KGF (rKGF) was mitogenic with a specific activity around 10-fold higher than native KGF. By in vitro mutagenesis, we generated a series of KGF mutants with sequential deletions of the amino-terminal domain, the most divergent region among different FGF members. Mutant proteins, produced in bacteria, were tested for their ability to bind heparin, bind and activate the KGF receptor, and induce DNA synthesis. Heparin binding properties were preserved with deletion of up to 28 amino-terminal residues of the mature KGF but lost by the deletion of an additional 10 residues. Biological activity of mutants with deletions of up to 10 residues was comparable to that of rKGF. However, deletion of 29 residues resulted in significantly reduced ability to stimulate KGF receptor tyrosine-kinase activity and DNA synthesis, although this mutant bound the receptor at high affinity. These characteristics of a partial agonist may be useful in the development of competitive antagonists of KGF action.