Leukemia Inhibitory Factor (LIF) interacts with two classes of high affinity binding sites on rat UMR cells cultured in monolayer. One class of binding sites was found to be localized in the extracellular matrix (ECM) after removal of cells from the culture dish. The interaction of LIF with ECM-localized binding sites is not dependent upon either glycosylation of LIF or the presence of extracellular glycosyaminoglycans. Chemical cross-linking studies demonstrate that LIF interacts with a 200-kD cell-associated protein and a 140-kD ECM-localized protein. A 140-kD protein could also be specifically precipitated from solubilised metabolically radiolabeled UMR ECM by antibodies directed against LIF by virtue of its ability to form a stable complex with unlabeled LIF. In addition, soluble LIF associated with this ECM-localized protein is biologically active in terms of inhibition of ES cell differentiation. The properties of ECM-localized 140-kD species are very similar to those of the secreted form of the LIF receptor suggesting that the ECM localization of LIF and LIF signal transduction may be closely coupled.