Neurocan is a multidomain hyaluronan-binding chondroitin sulfate proteoglycan that is synthesized by neurons, whereas the astroglial proteoglycan phosphacan is an mRNA splice variant representing the entire extracellular portion of a receptor-type protein tyrosine phosphatase. A glycoform of phosphocan (phosphocan-KS) that contains both chondroitin sulfate and keratan sulfate is present in the postnatal rat central nervous system (CNS). The concentration of neurocan in brain increases during late embryonic development but then declines steeply during the early postnatal period together with hyaluronan, and neurocan also undergoes extensive proteolytic processing during the course of brain development. In contrast, the concentrations of both phosphocan and phosphocan-KS rise steadily after embryonic day 20 to reach a plateau at about 2 weeks postnatally. In the embryonic CNS the distribution of neurocan mRNA is more widespread than that of phosphocan, which is primarily present in regions of active cell proliferation. Neurocan mRNA is also present in areas where the proteoglycan is not expressed, and there is evidence that the short open reading frame in its 5'-leader may function as a cis-acting regulatory signal for the modulation of neurocan expression in the developing CNS. Neurocan and phosphocan bind saturably, reversibly, and with high affinity to neural cell adhesion molecules (Ng-CAM/L1, NCAM, TAG-1/axonin-1) and to tenascin-C. The proteoglycans and their ligands have overlapping localizations in the CNS, and binding of phosphocan to Ng-CAM/L1, NCAM, and tenascin-C is mediated by complex-type N-linked oligosaccharides on the proteoglycan. Neurocan and phosphocan also bind to neurons and are potent inhibitors of neuronal and glial adhesion and neurite outgrowth. Through their interactions with neural cell adhesion and extracellular matrix molecules, these proteoglycans may play a major role in modulating cell adhesion, neurite growth, and signal transduction across the plasma membrane during the development of the CNS.