Heparanase is an endoglycosidase that cleaves heparan sulfate (HS) side chains from heparan sulfate proteoglycans (HSPGs) present in extracellular matrix and cell membranes. Although HSPGs have many functions during development, little is known of the role of the enzyme that degrades HS, heparanase. We cloned and characterized the expression of two heparanase splicing variants from Xenopus laevis and studied their function in early embryonic development. The heparanase gene (termed xHpa) spans over 15 kb and consists of at least 12 exons. The long heparanase (XHpaL) cDNA encodes a 531-amino acid protein, whereas the short splicing variant (XHpaS) results in a protein with the same open reading frame but missing 58 amino acids as a consequence of a skipped exon 4. Comparative studies of both isoforms using heterologous expression systems showed: 1) XHpaL is enzymatically active, whereas XHpaS is not; 2) XHpaL and XHpaS interact with heparin and HS; 3) both proteins traffic through the endoplasmic reticulum and Golgi apparatus, but XHpaL is secreted into the medium, whereas XHpaS remains associated with the membrane as a consequence of the loss of three glycosylation sites; 4) overexpression of XHpaS but not XHpaL increases cell adhesion of glioma cells to HS-coated surfaces; 5) XHpaL and XHpaS mRNA and protein levels vary as development progresses; 6) specific antisense knock-down of both XHpaL and XHpaS, but not XHpaL alone, results in failure of embryogenesis to proceed. Interestingly, rescue experiments suggest that the two heparanases regulate the same developmental processes, but via different mechanisms.