During peripheral nerve development, Schwann cells synthesize collagen type V molecules that contain alpha4(V) chains. This collagen subunit possesses an N-terminal domain (NTD) that contains a unique high affinity heparin binding site. The alpha4(V)-NTD is adhesive for Schwann cells and sensory neurons and is an excellent substrate for Schwann cell and axonal migration. Here we show that the alpha4(V)-NTD is released constitutively by Schwann cells both in culture and in vivo. In cultures of neonatal rat Schwann cells, alpha4(V)-NTD release is increased significantly by ascorbate treatment, which facilitates collagen post-translational modification and collagen trimer assembly. In peripheral nerve tissue, the alpha4(V)-NTD is localized to the region of the outer Schwann cell membrane and associated extracellular matrix. The released alpha4(V)-NTD binds to the cell surface and extracellular matrix heparan sulfate proteoglycans of Schwann cells. Pull-down assays and immunofluorescent staining showed that the major alpha4(V)-NTD-binding proteins are glypican-1 and perlecan. alpha4(V)-NTD binding occurs via a mechanism that requires the high affinity heparin binding site and that is blocked by soluble heparin, demonstrating that binding to proteoglycans is mediated by their heparan sulfate chains.