The L1 adhesion molecule is a 200-220-kDa membrane glycoprotein of the Ig superfamily implicated in important neural processes including neuronal cell migration, axon outgrowth, learning, and memory formation. L1 supports homophilic L1-L1 binding that involves several Ig domains but can also bind with high affinity to the proteoglycan neurocan. It has been reported that neurocan can block homophilic binding; however, the mechanism of inhibition and the precise binding sites in both molecules have not been determined. By using fusion proteins, site-directed mutagenesis, and peptide blocking experiments, we have characterized the neurocan-binding site in the first Ig-like domain of human L1. Results from molecular modeling suggest that the sequences involved in neurocan binding are localized on the surface of the first Ig domain and largely overlap with the G-F-C beta-strands proposed to interact with the fourth Ig domain during homophilic binding. This suggests that neurocan may sterically hinder a proper alignment of L1 domains. We find that the C-terminal portion of neurocan is sufficient to mediate binding to the first Ig domain of L1, and we suggest that the sushi domain cooperates with a glycosaminoglycan side chain in forming the binding site for L1.