Follistatin is an activin-binding protein, which inhibits activin bioactivity in several biological systems. In the present study it is demonstrated that preincubation of iodinated activin A with follistatin, purified from porcine follicular fluid, completely abolished the binding of activin to activin type IIA, IIB2 and IIB4 receptors, and consequently to activin type IB receptor, transiently transfected in COS cells. Binding of activin A to membrane proteins on the activin-responsive P19 embryonal carcinoma cells was also prevented by this follistatin preparation. The same results were obtained with a carboxy-terminally truncated form of follistatin (FS-288), which is only present in minor amounts in the purified follistatin preparation. Since FS-288 has a high affinity for heparan sulfate proteoglycans on the cell surface, we tested whether membrane-bound FS-288 presents activin A to the different activin receptors, thereby facilitating activin binding. FS-288 did bind to the cell surface of transfected COS cells, but inhibited the binding of activin A to its receptors IIA, IIB2 and IIB4. Furthermore, after addition of FS-288 to K562 erythroleukemia cells, the total binding of activin via cell surface-bound FS-288 was increased, whereas the binding of activin A to activin type II and type I receptors present on these cells was inhibited. These findings reveal that different forms of follistatin can neutralize activin bioactivity by interference with binding of activin to all known activin type II receptors, rather than that they inhibit the binding of the type I receptor to the activin/activin type II receptor complex. In addition, our studies indicate that cell surface-associated follistatin cannot present ligand to signalling receptors.