Protein tyrosine phosphatase zeta (PTPzeta) is a receptor type protein tyrosine phosphatase that uses pleiotrophin as a ligand. Pleiotrophin inactivates the phosphatase activity of PTPzeta, resulting in the increase of tyrosine phosphorylation levels of its substrates. We studied the functional interaction between PTPzeta and DNER, a Notch-related transmembrane protein highly expressed in cerebellar Purkinje cells. PTPzeta and DNER displayed patchy colocalization in the dendrites of Purkinje cells, and immunoprecipitation experiments indicated that these proteins formed complexes. Several tyrosine residues in and adjacent to the tyrosine-based and the second C-terminal sorting motifs of DNER were phosphorylated and were dephosphorylated by PTPzeta, and phosphorylation of these tyrosine residues resulted in the accumulation of DNER on the plasma membrane. DNER mutants lacking sorting motifs accumulated on the plasma membrane of Purkinje cells and Neuro-2A cells and induced their process extension. While normal DNER was actively endocytosed and inhibited the retinoic-acid-induced neurite outgrowth of Neuro-2A cells, pleiotrophin stimulation increased the tyrosine phosphorylation level of DNER and suppressed the endocytosis of this protein, which led to the reversal of this inhibition, thus allowing neurite extension. These observations suggest that pleiotrophin-PTPzeta signaling controls subcellular localization of DNER and thereby regulates neuritogenesis.