Astrocytes, oligodendrocytes, and oligodendrocyte/type 2 astrocyte progenitors (O2A cells) can all produce molecules that inhibit axon regeneration. We have shown previously that inhibition of axon growth by astrocytes involves proteoglycans. To identify inhibitory mechanisms, we created astrocyte cell lines that are permissive or nonpermissive and showed that nonpermissive cells produce inhibitory chondroitin sulfate proteoglycans (CS-PGs). We have now tested these cell lines for the production and inhibitory function of known large CS-PGs. The most inhibitory line, Neu7, produces three CS-PGs in much greater amounts than the other cell lines: NG2, versican, and the CS-56 antigen. The contribution of NG2 to inhibition by the cells was tested using a function-blocking antibody. This allowed increased growth of dorsal root ganglion (DRG) axons over Neu7 cells and matrix and greatly increased the proportion of cortical axons able to cross from permissive A7 cells onto inhibitory Neu7 cells; CS-56 antibody had a similar effect. Inhibitory fractions of conditioned medium contained NG2 coupled to CS glycosaminoglycan chains, whereas noninhibitory fractions contained NG2 without CS chains. Enzyme preparations that facilitated axon growth in Neu7 cultures were shown to either degrade the NG2 core protein or remove CS chains. Versican is present as patches on Neu7 monolayers, but DRG axons do not avoid these patches. Therefore, NG2 appears to be the major axon-inhibitory factor made by Neu7 astrocytes. In the CNS, NG2 is expressed by O2A cells, which react rapidly after injury to produce a dense NG2-rich network, and by some reactive astrocytes. Our results suggest that NG2 may be a major obstacle to axon regeneration.