Transforming growth factor-β1 (TGF-β1, Uniprot: P01137) is a heparin-binding protein that has been implicated in a number of physiological processes, including the initiation of chondrogenesis by human mesenchymal stem cells (hMSCs). Here, we identify the molecular features in the protein and in heparin required for binding and their effects on the potentiation of TGF-β1's activity on hMSCs. Using a proteomics “Protect and Label” approach, lysines K291, K304, K309, K315, K338, K373, K375 and K388 were identified as being directly involved in binding heparin (Data are available via ProteomeXchange with identifier PXD002772). Competition assays in an optical biosensor demonstrated that TGF-β1 does require N- and 6-O-sulfate groups for binding but that 2-O-sulfate groups are unlikely to underpin the interaction. Heparin-derived oligosaccharides as short as degree of polymerization (dp) 4 have a weak ability to compete for TGF-β1 binding to heparin, which increases with the length of the oligosaccharide to reach a maximum between dp18 and dp24. In cell-based assays, heparin, 2-O-, 6-O- and N-desulfated re-N-acetylated heparin and oligosaccharides 14–24 saccharides (dp14–24) in length all increased the phosphorylation of mothers against decapentaplegic homolog 2 (SMAD2) after 6 h of stimulation with TGF-β1. The results provide the structural basis for a model of heparin/heparan sulfate binding to TGF-β1 and demonstrate that the features in the polysaccharide required for binding are not identical to those required for sustaining the signaling by TGF-β1 in hMSCs.