The mechanism by which the neural cell adhesion molecule, N-CAM, mediates homophilic interactions between cells has been variously attributed to an isologous interaction of the third immunoglobulin (Ig) domain, to reciprocal binding of the two N-terminal Ig domains, or to reciprocal interactions of all five Ig domains. Here, we have used a panel of recombinant proteins in a bead binding assay, as well as transfected and primary cells, to clarify the molecular mechanism of N-CAM homophilic binding. The entire extracellular region of N-CAM mediated bead aggregation in a concentration- and temperature-dependent manner. Interactions of the N-terminal Ig domains, Ig1 and Ig2, were essential for bead binding, based on deletion and mutation experiments and on antibody inhibition studies. These findings were largely in accord with aggregation experiments using transfected L cells or primary chick brain cells. Additionally, maximal binding was dependent on the integrity of the intramolecular domain-domain interactions throughout the extracellular region. We propose that these interactions maintain the relative orientation of each domain in an optimal configuration for binding. Our results suggest that the role of Ig3 in homophilic binding is largely structural. Several Ig3-specific reagents failed to affect N-CAM binding on beads or on cells, while an inhibitory effect of an Ig3-specific monoclonal antibody is probably due to perturbations at the Ig2-Ig3 boundary. Thus, it appears that reciprocal interactions between Ig1 and Ig2 are necessary and sufficient for N-CAM homophilic binding, but that maximal binding requires the quaternary structure of the extracellular region defined by intramolecular domain-domain interactions.