Syndecan-2 is a heparan sulfate proteoglycan that has a cell adhesion regulatory domain contained within its extracellular core protein. Cell adhesion to the syndecan-2 extracellular domain (S2ED) is β1 integrin dependent; however, syndecan-2 is not an integrin ligand. Here the protein tyrosine phosphatase receptor CD148 is shown to be a key intermediary in cell adhesion to S2ED, with downstream β1 integrin-mediated adhesion and cytoskeletal organization. We show that S2ED is a novel ligand for CD148 and identify the region proximal to the transmembrane domain of syndecan-2 as the site of interaction with CD148. A mechanism for the transduction of the signal from CD148 to β1 integrins is elucidated requiring Src kinase and potential implication of the C2β isoform of phosphatidylinositol 3 kinase. Our data uncover a novel pathway for β1 integrin-mediated adhesion of importance in cellular processes such as angiogenesis and inflammation.