Wound repair is a tightly regulated process stimulated by proteases, growth factors, and chemokines, which are modulated by heparan sulfate. To characterize further the role of the heparan sulfate proteoglycan syndecan-1 in wound repair, we generated mice overexpressing syndecan-1 (Snd/Snd) and studied dermal wound repair. Wound closure, reepithelialization, granulation tissue formation, and remodeling were delayed in Snd/Snd mice. Soluble syndecan-1 was increased, and shedding was prolonged in wounds from Snd/Snd mice. Excess syndecan-1 increased the elastolytic activity of wound fluids. Additionally, cells in the granulation tissue and keratinocytes at wound edges showed markedly reduced proliferation rates in Snd/Snd mice. Skin grafting experiments between Snd/Snd and control mice indicated that the slower growth rate was mainly due to a soluble factor in the Snd/Snd mouse skin. Syndecan-1 immunodepletion and further degradation experiments identified syndecan-1 ectodomain as a dominant negative inhibitor of cell proliferation. These studies indicate that shed syndecan-1 ectodomain may enhance proteolytic activity and inhibit cell proliferation during wound repair.