Fetal alcohol syndrome is a leading cause of mental retardation. The neuropathology found in patients with fetal alcohol syndrome overlaps with those with mutations in the gene for cell adhesion molecule (L1). We have previously shown that L1-mediated neurite outgrowth and L1 activation of extracellular receptor kinases 1/2 are inhibited at low concentrations of ethanol. One possible mechanism for this effect is through disruption of a tyrosine-based sorting signal, Y(1176)RSLE, on the cytoplasmic domain of L1. Our goal was to determine if ethanol inhibited the sorting signal or its phosphorylation state. Using cerebellar granule neurons and dorsal root ganglion neurons, we found that ethanol had no effect on L1 distribution to the growth cone or its ability to be expressed on the cell surface as determined by confocal microscopy. In cerebellar granule neurons, clustering of L1 resulted in increased dephosphorylation of Y(1176), increased L1 tyrosine phosphorylation, and an increase in the activation of pp60(src) as measured by immunoblot. All changes were inhibited by 25 mM ethanol. Using PP2 to inhibit pp60(src) activation resulted in inhibition of increases in L1 tyrosine and extracellular receptor kinases 1/2 phosphorylation, and Y(1176) dephosphorylation. We conclude that ethanol disrupts L1 trafficking/signaling following its expression on the surface of the growth cone, and prior to its activation of pp60(src).