Via its extracellular N-terminal domain (NTD), the AMPA receptor subunit GluR2 promotes the formation and growth of dendritic spines in cultured hippocampal neurons. Here we show that the first N-terminal 92 amino acids of the extracellular domain are necessary and sufficient for GluR2's spine-promoting activity. Moreover, overexpression of this extracellular domain increases the frequency of miniature excitatory postsynaptic currents (mEPSCs). Biochemically, the NTD of GluR2 can interact directly with the cell adhesion molecule N-cadherin, in cis or in trans. N-cadherin-coated beads recruit GluR2 on the surface of hippocampal neurons, and N-cadherin immobilization decreases GluR2 lateral diffusion on the neuronal surface. RNAi knockdown of N-cadherin prevents the enhancing effect of GluR2 on spine morphogenesis and mEPSC frequency. Our data indicate that in hippocampal neurons N-cadherin and GluR2 form a synaptic complex that stimulates presynaptic development and function as well as promoting dendritic spine formation.