The hallmark of Alzheimer's disease (AD) is the deposition of amyloid plaques and neurofibrillary tangles in the brain. The relationship between amyloid deposition and the cognitive deficit is still unclear. The amyloid beta A4 protein is produced by proteolytic cleavage of the amyloid protein precursor (APP). Very little is known about the normal function of APP and the role the protein may play in pathogenesis. Several studies have shown that APP is important for the regulation of neurite outgrowth. Our studies support these findings and indicate that the neurite outgrowth-promoting effects of APP are stimulated by an interaction between APP and specific proteoglycans. Using site-directed mutagenesis, a heparan sulfate binding site which mediates this effect has been mapped to the N-terminus of APP (residues 96-110, HBD-1). A peptide homologous to HBD-1 blocks the trophic effects of APP in cell culture. To purify specific proteoglycans which stimulate the action of APP, an affinity column was constructed using a biotinylated peptide homologous to HBD-1 coupled to streptavidin-agarose. Two proteoglycans were isolated from a crude brain cell conditioned medium by affinity chromatography. The purified proteoglycans bound APP saturably with high affinity and stimulated the action of APP on neurite outgrowth from chick sympathetic neurons. Digestion of the proteoglycan fraction with heparitinase I or chondroitinase ABC demonstrated the presence of two major proteins, a heparan sulfate proteoglycan with a core protein of 63-67 kD molecular mass and a chondroitin sulfate proteoglycan with a core protein of 100-110 kD molecular mass. The results demonstrate that APP binds to at least two proteoglycans and that this interaction may regulate the trophic effects of the protein. The interaction of specific APP-binding proteoglycans with amyloid plaques may disturb the normal function of APP and contribute to the neuritic degeneration that is commonly seen around the amyloid plaque cores.