The insulin-like growth factor binding proteins (IGFBPs) are a family of six secreted proteins which bind to and modulate the actions of insulin-like growth factors-I and -II (IGF-I and -II). IGFBP-5 is more conserved than other IGFBPs characterized to date, and is expressed in adult rodent muscle and in the developing myotome. We have shown previously that C2 myoblasts secrete IGFBP-5 as their sole IGFBP. Here we use these cells to study the function of IGFBP-5 during myogenesis, a process stimulated by IGFs. We stably transfected C2 cells with IGFBP-5 cDNAs under control of a constitutively active promoter. Compared with vector-transfected control cells, C2 myoblasts expressing the IGFBP-5 transgene in the sense orientation exhibit increased IGFBP-5 levels in the extracellular matrix during proliferation, and subsequently fail to differentiate normally, as assessed by both morphological and biochemical criteria. Compared to controls, IGFBP-5 sense myoblasts show enhanced survival in low serum medium, remaining viable for at least four weeks in culture. By contrast, myoblasts expressing the IGFBP-5 antisense transcript differentiate prematurely and more extensively than control cells. The inhibition of myogenic differentiation by high level expression of IGFBP-5 could be overcome by exogenous IGFs, with des (1-3) IGF-I, an analogue with decreased affinity for IGFBP-5 but normal affinity for the IGF-I receptor, showing the highest potency. These results are consistent with a model in which IGFBP-5 blocks IGF-stimulated myogenesis, and indicate that sequestration of IGFs in the extracellular matrix could be a possible mechanism of action. Our observations also suggest that IGFBP-5 normally inhibits muscle differentiation, and imply a role for IGFBP-5 in regulating IGF action during myogenic development in vivo.