The interaction between myelin-associated glycoprotein (MAG), expressed at the periaxonal membrane of myelin, and receptors on neurons initiates a bidirectional signalling system that results in inhibition of neurite outgrowth and maintenance of myelin integrity. We show that this involves a lipid-raft to lipid-raft interaction on opposing cell membranes. MAG is exclusively located in low buoyancy Lubrol WX-insoluble membrane fractions isolated from whole brain, primary oligodendrocytes, or MAG-expressing CHO cells. Localisation within these domains is dependent on cellular cholesterol and occurs following terminal glycosylation in the trans-Golgi network, characteristics of association with lipid rafts. Furthermore, a recombinant form of MAG interacts specifically with lipid-raft fractions from whole brain and cultured cerebellar granule cells, containing functional MAG receptors GT1b and Nogo-66 receptor and molecules required for transduction of signal from MAG into neurons. The localisation of both MAG and MAG receptors within lipid rafts on the surface of opposing cells may create discrete areas of high avidity multivalent interaction, known to be critical for signalling into both cell types. Localisation within lipid rafts may provide a molecular environment that facilitates the interaction between MAG and multiple receptors and also between MAG ligands and molecules involved in signal transduction.