The transmembrane and multidomain neural cell adhesion molecule (NCAM) plays important functional roles in the developing and adult nervous system. NCAM is proteolytically processed and appears in soluble forms in the cerebrospinal fluid and in serum under normal and pathological conditions. In this report, we present evidence that the metalloprotease a disintegrin and a metalloprotease (ADAM)17/tumour necrosis factor alpha converting enzyme (TACE) cleaves the polysialylated as well as the non-polysialylated transmembrane isoforms of NCAM, whereas the glycophosphatidylinositol-linked isoform of NCAM is not proteolytically cleaved. A truncated, enzymatically inactive mutant of TACE did not result in release of the NCAM110 cleavage product. Proteolytic cleavage was enhanced by a calmodulin-specific inhibitor and the actin-destabilizing agents cytochalasin D and latrunculin B. In contrast, the microtubule-stabilizing agent colchicine or microtubule-destabilizing agent paclitaxel did not affect the release of the 110-kDa fragment of NCAM. Neurite outgrowth from cerebellar microexplants was inhibited in the presence of the metalloprotease inhibitor GM 6001 on substrate-coated NCAM, but not on poly-l-lysine. Upon transfection of hippocampal neurones with an enzymatically inactive mutant of TACE, NCAM-stimulated neurite outgrowth was inhibited without affecting neurite outgrowth on poly-l-lysine, showing that proteolytic processing of NCAM by the metalloprotease TACE is involved in NCAM-mediated neurite outgrowth.