This review summarizes our current understanding of the presence and function of heparan sulfate proteoglycans (HSPGs) in skeletal development and hematopoiesis. Although proteoglycans (PGs) comprise a large and diverse group of cell surface and matrix molecules, we chose to focus on HSPGs owing to their many proposed functions in skeletogenesis and hematopoiesis. Specifically, we discuss how HSPGs play predominant roles in establishing and regulating niches during skeleto-hematopoietic development by participating in distinct developmental processes such as patterning, compartmentalization, growth, differentiation, and maintenance of tissues. Special emphasis is placed on our novel hypothesis that mechanistically links endochondral skeletogenesis to the establishment of the hematopoietic stem cell (HSC) niche in the marrow. HSPGs may contribute to these developmental processes through their unique abilities to establish and mediate morphogen, growth factor, and cytokine gradients; facilitate signaling; provide structural stability to tissues; and act as molecular filters and barriers. Developmental Dynamics 237:2622–2642, 2008. © 2008 Wiley-Liss, Inc.