The release of amyloid precursor protein (APP) intracellular domain (AICD) may be triggered by extracellular cues through gamma-secretase-dependent cleavage. AICD binds to Fe65, which may have a role in AICD-dependent signalling; however, the functional ligand has not been characterized. In this study, we have identified TAG1 as a functional ligand of APP. We found that, through an extracellular interaction with APP, TAG1 increased AICD release and triggered Fe65-dependent activity in a gamma-secretase-dependent manner. TAG1, APP and Fe65 colocalized in the neural stem cell niche of the fetal ventricular zone. Neural precursor cells from TAG1-/-, APP-/- and TAG1-/-;APP-/- mice had aberrantly enhanced neurogenesis, which was significantly reversed in TAG1-/- mice by TAG1 or AICD but not by AICD mutated at the Fe65 binding site. Notably, TAG1 reduced normal neurogenesis in Fe65+/+ mice. Abnormally enhanced neurogenesis also occurred in Fe65-/- mice but could not be reversed by TAG1. These results describe a TAG1-APP signalling pathway that negatively modulates neurogenesis through Fe65.