The neural cell adhesion molecule (NCAM) promotes axonal growth via a homophilic binding mechanism by acting both as a neuronal receptor and a substratum ligand. We have previously shown that the GPI-linked 120-kDa isoform of NCAM, which lacks a cytoplasmic domain, is effective at promoting neurite outgrowth as a cellular ligand. To test its ability to function as a neuronal receptor, we have transfected PC12 cells with a cDNA encoding human GPI-linked NCAM and tested clones displaying stable cell surface expression of this isoform for their ability to respond to NCAM in a cellular substratum. Although they continued to express endogenous transmembrane rat isoforms of NCAM (140 and 180 kDa), PC12 cells expressing the GPI-linked NCAM lost their ability to extend neurites in response to substratum associated NCAM. However, their outgrowth response to N-cadherin and other activators of axonal growth was undiminished. Removal of GPI-linked NCAM from the surface of these clones using phosphatidylinositol-specific phospholipase C (PIPLC) fully restored their responsiveness to NCAM, indicating that the inhibition was a direct consequence of cell surface expression of this "dominant negative" isoform of NCAM. We have previously shown that expression of transfected 140- and 180-kDa isoforms of human NCAM in PC12 cells does not result in a loss of the neurite outgrowth response to NCAM. However, we show that deletion of the cytoplasmic domain of the 140-kDa isoform has the same effect as expression of GPI-linked NCAM. We conclude that the cytoplasmic domain of NCAM is required for an appropriate neurite outgrowth response.