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We have previously shown that aggregation of microbeads coated with N- CAM and Ng-CAM is inhibited by incubation with soluble neurocan, a chondroitin sulfate proteoglycan of brain, suggesting that neurocan binds to these cell adhesion molecules (Grumet, M., A. Flaccus, and R. U. Margolis. 1993. J. Cell Biol. 120:815). To investigate these interactions more directly, we have tested binding of soluble 125I- neurocan to microwells coated with different glycoproteins. Neurocan bound at high levels to Ng-CAM and N-CAM, but little or no binding was detected to myelin-associated glycoprotein, EGF receptor, fibronectin, laminin, and collagen IV. The binding to Ng-CAM and N-CAM was saturable and in each case Scatchard plots indicated a high affinity binding site with a dissociation constant of approximately 1 nM. Binding was significantly reduced after treatment of neurocan with chondroitinase, and free chondroitin sulfate inhibited binding of neurocan to Ng-CAM and N-CAM. These results indicate a role for chondroitin sulfate in this process, although the core glycoprotein also has binding activity. The COOH-terminal half of neurocan was shown to have binding properties essentially identical to those of the full-length proteoglycan. To study the potential biological functions of neurocan, its effects on neuronal adhesion and neurite growth were analyzed. When neurons were incubated on dishes coated with different combinations of neurocan and Ng-CAM, neuronal adhesion and neurite extension were inhibited. Experiments using anti-Ng-CAM antibodies as a substrate also indicate that neurocan has a direct inhibitory effect on neuronal adhesion and neurite growth. Immunoperoxidase staining of tissue sections showed that neurocan, Ng-CAM, and N-CAM are all present at highest concentration in the molecular layer and fiber tracts of developing cerebellum. The overlapping localization in vivo, the molecular binding studies, and the striking effects on neuronal adhesion and neurite growth support the view that neurocan may modulate neuronal adhesion and neurite growth during development by binding to neural cell adhesion molecules.