Chondroitin sulfate proteoglycans (CSPGs) present a barrier to axon regeneration. However, no specific receptor for the inhibitory effect of CSPGs has been identified. We showed that a transmembrane protein tyrosine phosphatase, PTPσ, binds with high affinity to neural CSPGs. Binding involves the chondroitin sulfate chains and a specific site on the first immunoglobulin-like domain of PTPσ. In culture, PTPσ −/− neurons show reduced inhibition by CSPG. A PTPσ fusion protein probe can detect cognate ligands that are up-regulated specifically at neural lesion sites. After spinal cord injury, PTPσ gene disruption enhanced the ability of axons to penetrate regions containing CSPG. These results indicate that PTPσ can act as a receptor for CSPGs and may provide new therapeutic approaches to neural regeneration.Recovery after central nervous system (CNS) injury is minimal, leading to substantial current interest in potential strategies to overcome this challenge (1-5). Chondroitin sulfate proteoglycans (CSPGs) show dramatic up-regulation after neural injury, within the extracellular matrix of scar tissue and in the perineuronal net within more-distant targets of the severed axons (6,7). The inhibitory nature of CSPGs is reflected not only in the formation of dystrophic axonal retraction bulbs that fail to regenerate through the lesion (8), but also in the limited capacity for collateral sprouting of spared fibers (8,9). This inhibition can be relieved by chondroitinase ABC digestion of the chondroitin sulfate (CS) side chains, which can promote regeneration and sprouting and restore lost function (10)(11)(12)(13)(14). It has been known for nearly two decades that sulfated proteoglycans are major contributors to the repulsive nature of the glial scar (15); however, the precise inhibitory mechanism remains poorly understood. Because the identification of specific neuronal receptors for CSPGs has been lacking, relatively nonspecific mechanisms brought about by arrays of negatively charged sulfate (16) or the occlusion of substrate adhesion molecules (17) have been suggested.Transmembrane protein tyrosine phosphatases (PTPs) form a large and diverse molecular family and have a structure typical of transmembrane cell-surface receptors (18,19). In previous work, we and others have found that PTPσ and other PTPs in the leukocyte antigen-related (LAR) subfamily can act as receptors for heparan sulfate proteoglycans (HSPGs) (20)(21)(22), and these PTPs are involved in axon guidance and synapse formation during development (18- ‡To whom correspondence should be addressed. flanagan@hms.harvard.edu. * These authors contributed equally to this work. † Present address: Motor Neuron Center, Columbia University, New York, NY 10032, USA. (Fig. 1A). Using a cell-free system with recombinant fusion proteins of the PTPσ extra-cellular domain with an immunoglobulin Fc tag (PTPσ-Fc) and neurocan with an alkaline phosphatase tag (Ncn-AP), a binding interaction was indeed identified (P < 0.001) (Fig. 1B). Genuine biological ligand-re...