Nr-CAM is a membrane glycoprotein that is expressed on neurons. It is structurally related to members of the N-CAM superfamily of neural cell adhesion molecules having six immunoglobulin-like domains and five fibronectin type III repeats in the extracellular region. We have found that the aggregation of chick brain cells was inhibited by anti-Nr-CAM Fab' fragments, indicating that Nr-CAM can act as a cell adhesion molecule. To clarify the mode of action of Nr-CAM, a mouse fibroblast cell line L-M(TK-) (or L cells) was transfected with a DNA expression construct encoding an entire chicken Nr-CAM cDNA sequence. After transfection, L cells expressed Nr-CAM on their surface and aggregated. Aggregation was specifically inhibited by anti-Nr-CAM Fab' fragments. To check the specificity of this aggregation, a fusion protein (FGTNr) consisting of glutathione S-transferase linked to the six immunoglobulin domains and the first fibronectin type III repeat of Nr-CAM was expressed in Escherichia coli. Addition of FGTNr to the transfected cells blocked their aggregation. Further analysis using a combination of cell aggregation assays, binding of cells to FGTNr-coated substrates, aggregation of FGTNr-coated Covaspheres and binding of FGTNr-coated Covaspheres to FGTNr-coated substrates revealed that Nr-CAM mediates two types of cell interactions: a homophilic, divalent cation-independent binding, and a heterophilic, divalent cation-dependent binding. Homophilic binding was demonstrated between transfected L cells, between chick embryo brain cells and FGTNr, and between Covaspheres to which FGTNr was covalently attached. Heterophilic binding was shown to occur between transfected and untransfected L cells, and between FGTNr and primary chick embryo fibroblasts; in all cases, it was dependent on the presence of either calcium or magnesium. Primary chick embryo glia or a human glial cell line did not bind to FGTNr-coated substrates. The results indicate that Nr-CAM is a cell adhesion molecule of the nervous system that can bind by two distinct mechanisms, a homophilic mechanism that can mediate interactions between neurons and a heterophilic mechanism that can mediate binding between neurons and other cells such as fibroblasts.