Alzheimer's disease (AD) is characterized by the deposition of amyloid in the extracellular and intracellular compartments of the cerebral cortex. The extracellular amyloid consists of a protein (beta A4) which is derived from a larger precursor, the amyloid protein precursor (APP). Several studies have implicated APP in the regulation of neurite outgrowth during development, although the precise function of APP remains unknown. To examine the role of APP in the regulation of neurite outgrowth from hippocampal neurons, an explant culture system was developed. Explants of E18 mouse hippocampus were found to extend neurites when co-cultured with explants of E18 mouse septum. This finding demonstrated that the septum can release a neurite outgrowth-promoting factor (NOPF). As nerve growth factor (NGF) was also able to stimulate neurite outgrowth from the hippocampal explants, this suggested that the NOPF might be NGF. Immunoprecipitation of NGF from septal conditioned medium using a specific monoclonal antibody (27/21) completely blocked the neurite outgrowth-promoting effect, supporting this conclusion. Concomitant with its ability to stimulate neurite outgrowth, NGF stimulated the release of APP from the hippocampal explants. As previous studies have suggested that the binding of APP to heparan sulfate proteoglycans (HSPGs) in the extracellular matrix might be an important step in the regulation of neurite outgrowth by NGF, we examined the effect of APP on neurite outgrowth from dissociated hippocampal cells cultured on various protein substrates. When cells were cultured on a substrate of APP and HSPG, neurite outgrowth was markedly stimulated. No stimulation of neurite outgrowth was seen when neurons were cultured on substrates of either APP or HSPG alone. The results suggest that secreted forms of APP may be involved in stimulating neurite outgrowth from hippocampal neurons and that interactions between APP and HSPG may be important for a neurite outgrowth-promoting function.