Leucine-rich repeats and immunoglobulin-like domains-1 (LRIG1) is a transmembrane protein with an ectodomain containing 15 leucine-rich repeats (LRRs) homologous to mammalian decorin and the Drosophila kekkon1 gene. In this study, we demonstrate that a soluble ectodomain of LRIG1, containing only the LRRs, inhibits ligand-independent epidermal growth factor receptor (EGFR) activation and causes growth inhibition of A431, HeLa and MDA-468 carcinoma cells. In contrast, cells that do not express detectable levels of EGFR fail to respond to soluble LRIG1. However, when a functional EGFR gene is introduced in these cells, they become growth-inhibited by soluble LRIG1 protein. Furthermore, we demonstrate the existence of high-affinity (K(d)=10 nM) binding sites on the A431 cells that can be competitively displaced (up to 75%) by molar excess of EGF. Even more powerful effects are obtained with a chimeric proteoglycan harboring the N-terminus of decorin, substituted with a single glycosaminoglycan chain, fused to the LRIG1 ectodomain. Both proteins also inhibit ligand-dependent activation of the EGFR and extracellular signal-regulated protein kinase 1/2 signaling in a rapid and dose-dependent manner. These results suggest a novel mechanism of action evoked by a soluble ectodomain of LRIG1 protein that could modulate EGFR signaling and its growth-promoting activity. Attenuation of EGFR activity without physical downregulation of the receptor could represent a novel therapeutic approach toward malignancies in which EGFR plays a primary role in tumor growth and survival.