The murine fibroblast growth factor receptor 2 (FGFR2) and keratinocyte growth factor receptor (KGFR) are two products of the same gene which display distinct binding specificities. We and others have shown that a major structural element underlying this functional divergence is a variable 50 amino acids long region constituting the C-terminal half of the third immunoglobulin (Ig)-like domain of the receptor. This region of the two receptors is encoded by two distinct exons which are alternatively used in cells of different tissues and origin. To further investigate the role of this confined variable region in determining ligand binding specificity we have generated a chimeric molecule between FGFR1 and KGFR where the variable segment of KGFR replaces the homologous region in FGFR1. Binding studies as well as chemical crosslinking of radiolabeled ligands revealed that the recombinant FGFR1/KGFR chimera has retained the binding affinity to acidic FGF and FGF4 (hst/kfgf) but lost the capacity to bind basic FGF (bFGF). This chimeric receptor bound keratinocyte growth factor (KGF), however, with significantly lower affinity as compared with KGFR. High affinity binding of KGF was acquired only when also domain 2 in this chimera was replaced by its homologous domain from FGFR2. These results demonstrate that ligand binding and specificity involves multiple receptor elements which are located at both Ig-like domain 2 and 3 of FGF receptors.