The cell surface proteoglycan on normal murine mammary gland (NMuMG) epithelial cells consists of a lipophilic domain, presumably intercalated into the plasma membrane, and an ectodomain that binds via its glycosaminoglycan chains to matrix components, is released intact by proteases and is detected by monoclonal antibody 281-2. The antibody 281-2 also detects a proteoglycan in the culture medium conditioned by NMuMG cells. This immunoactive proteoglycan was purified to homogeneity using DEAE-cellulose chromatography, isopycnic centrifugation, and 281-2 affinity chromatography. Comparison of the immunoreactive medium proteoglycan with the trypsin-released ectodomain revealed that these proteoglycans are indistinguishable by several criteria as both: (a) contain heparan sulfate and chondroitin sulfate chains; and (b) are similar in hydrodynamic size and buoyant density; (c) have the same size core protein (M(r) ~53 kD); (d) are nonlipophilic as studied by liposomal intercalation and transfer to silicone-treated paper. Kinetic studies of the release of proteoglycan from the surface of suspended NMuMG cells are interpreted to indicate that the immunoreactive medium proteoglycan is derived directly from the cell surface proteoglycan. Suspension of the cells both augments the release and inhibits the replacement of cell surface proteoglycan. These results indicate that the cell surface proteoglycan of NMuMG cells can be shed by cleavage of its matrix-binding ectodomain from its membrane-associated domain, providing a mechanism by which the epithelial cells can loosen their proteoglycan-mediated attachment to the matrix.