Embryonic development is orchestrated by the action of morphogens, which spread out from a local source and activate, in a field of target cells, different cellular programs based on their concentration gradient. Fibroblast growth factor 8 (Fgf8) is a morphogen with important functions in embryonic organizing centers. It forms a gradient in the extracellular space by free diffusion, interaction with the extracellular matrix (ECM) and receptor-mediated endocytosis. However, morphogen gradient regulation by ECM is still poorly understood. Here we show that specific Heparan Sulfate Proteoglycans (HSPGs) bind Fgf8 directly in the ECM of living zebrafish embryos, thus affecting its diffusion and signaling. Using single-molecule Fluorescence Correlation Spectroscopy, we quantify this bindingin vivo, and find two different modes of interaction. First, reducing or increasing the concentration of specific HSPGs in the extracellular space alters Fgf8 diffusion, and thus, its gradient shape. Second, ternary complex formation of Fgf8 ligand with Fgf-receptors and HSPGs at the cell surface requires HSPG attachment to the cell membrane. Together, our results show that graded Fgf8 morphogen distribution is achieved by constraining free Fgf8 diffusion through successive interactions with HSPGs at the cell surface and in ECM space.Statement of significanceFgf8 is a secreted morphogen signaling molecule that instrúcts neighboring arrays of undifferentiated cells about their position and cellular identity in tissue. Fgf8 and other morphogens are often distributed in a graded fashion, and can typically work at very low concentrations. To reproducibly generate information in developing tissue, mechanisms have evolved to carefully control distribution and concentration of Fgf8 morphogen. We show that freely diffusing Fgf8 morphogen moves through interstitial cell spaces on its way to target cells, and while doing so, interacts with ECM molecules in these spaces and at cell surfaces via low affinity, reversible binding. These interactions are important tuning mechanisms that contribute to forming the Fgf8 morphogen gradient and to cell surface receptor binding, and thus, to controlling cell type identity.Abstract FigureGraphical abstractTo generate a gradient, the morphogen Fgf8 shuttles between fast free diffusion through extracellular space (i), slow diffusion or immobility (ii, iii) when bound to Heparan Sulfate Proteoglycans (HSPGs), in the extracellular matrix (ECM) and at cell surface receptors (iv), as revealed by single molecule studies in living zebrafish embryos.