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Tissue morphogenesis during development is regulated by growth factors and cytokines, and is characterized by constant remodeling of extracellular matrix (ECM) in response to signaling molecules, for example, growth factors, cytokines, and so forth. Proteoglycans that bind growth factors are potential regulators of tissue morphogenesis during embryonic development. In this study, we showed that transgenic mice overexpressing biglycan under the keratocan promoter exhibited exposure keratitis and premature eye opening from noninfectious eyelid ulceration due to perturbation of eyelid muscle formation and the failure of meibomian gland formation. In addition, in vitro analysis revealed that biglycan binds to TGF-alpha, thus interrupting EGFR signaling pathways essential for mesenchymal cell migration induced by eyelid epithelium. The defects of TGF-alpha signaling by excess biglycan were further augmented by the interruption of the autocrine or paracrine loop of the EGFR signaling pathway of HB-EGF expression elicited by TGF-alpha. These results are consistent with the notion that under physiological conditions, biglycan secreted by mesenchymal cells serves as a regulatory molecule for the formation of a TGF-alpha gradient serving as a morphogen of eyelid morphogenesis.