The amyloid precursor protein (APP) of Alzheimer's disease has been shown to stimulate neurite outgrowth in vitro. The effect of APP on neurite outgrowth can be enhanced if APP is presented to neurons in substrate-bound form, in the presence of heparan sulfate proteoglycans. To identify specific heparan sulfate proteoglycans that bind to APP, conditioned medium from neonatal mouse brain cells was subjected to affinity chromatography with recombinant APP695 as a ligand. Glypican bound strongly to the APP affinity column. Purified glypican bound to APP with an equilibrium dissociation constant of 2.8 nM and inhibited APP-induced neurite outgrowth from chick sympathetic neurons. The effect of glypican was specific for APP, as glypican did not inhibit laminin-induced neurite outgrowth. Furthermore, treatment of cultures with 4-methylumbelliferyl-beta-D-xyloside, a competitive inhibitor of proteoglycan glycanation, inhibited APP-induced neurite outgrowth but did not inhibit laminin-induced neurite outgrowth. This result suggests that endogenous proteoglycans are required for substrate-bound APP to stimulate neurite outgrowth. Secreted glypican may act to inhibit APP-induced neurite outgrowth in vivo by competing with endogenous proteoglycans for binding to APP.