Proteins of the plasminogen activation system are broadly expressed throughout the nervous system, and key roles for these proteins in neuronal function have been demonstrated. Recent reports have established that plasminogen is synthesized in neuroendocrine tissues, making this protein and the proteolytic activity of the product of its activation, plasmin, available at sites separated anatomically from circulating, hepatocyte-derived plasminogen. Results with plasminogen-deficient humans and mice suggest a role for plasminogen in neuritogenesis. To elucidate the role of the plasminogen activation system in these processes, the function of plasminogen during neuritogenesis and neurite outgrowth was studied. It is shown here that plasminogen participates in neuritogenesis, as plasmin inhibitors reduced both neurite outgrowth and neurite length in PC-12 cells. The addition of exogenous plasminogen enhanced neurite outgrowth and neurite length in both PC-12 cells and primary cortical neurons. The proteolytic activity of plasmin was required, since mutation of the catalytic serine residue completely abolished the stimulatory activity. Furthermore, mutation of the lysine binding site within kringle 5 of the plasminogen molecule also reduced the neuritogenic activity of plasminogen. Additionally, we demonstrate that plasminogen specifically bound to laminin-1, the interaction resulted in increased plasminogen activation by tissue-type plasminogen activator, and was dependent on a functional lysine binding site within plasminogen kringle 5. Moreover, during NGF-induced neuritogenesis, laminin-1 was degraded, and this cleavage was catalyzed by plasmin. This study provides the first direct evidence that plasminogen participates in neurite outgrowth and also suggests that laminin-1 degradation by plasmin contributes to the process of neuritogenesis.