The second Ig module (IgII) of the neural cell adhesion molecule (NCAM) is known to bind to the first Ig module (IgI) of NCAM (so-called homophilic binding) and to interact with heparan sulfate and chondroitin sulfate glycoconjugates. We here show by NMR that the heparin and chondroitin sulfate-binding sites (HBS and CBS, respectively) in IgII coincide, and that this site overlaps with the homophilic binding site. Using NMR and surface plasmon resonance (SPR) analyses we demonstrate that interaction between IgII and heparin indeed interferes with the homophilic interaction between IgI and IgII. Accordingly, we show that treatment of cerebellar granule neurons (CGNs) with heparin inhibits NCAM-mediated outgrowth. In contrast, treatment with heparinase III or chondroitinase ABC abrogates NCAM-mediated neurite outgrowth in CGNs emphasizing the importance of the presence of heparan/chondroitin sulfates for proper NCAM function. Finally, a peptide encompassing HBS in IgII, termed the heparin-binding peptide (HBP), is shown to promote neurite outgrowth in CGNs. These observations indicate that neuronal differentiation induced by homophilic NCAM interaction is modulated by interactions with heparan/chondroitin sulfates.