L1 is a neural recognition molecule that promotes neural developmental and regenerative processes. Posttranslational cleavage of L1 is believed to be important for regulating its function in vivo, but little is known of the proteolytic systems responsible. In this study we present evidence that plasmin can regulate both L1 expression and function. The addition of plasmin to cell lines results in a dose-dependent loss of surface L1 expression, with the simultaneous appearance of soluble L1 species. The addition of plasminogen to primary neurons and melanoma cells also resulted in the generation of plasmin and the concomitant release of L1. One product of plasmin-mediated cleavage is an amino-terminal fragment of approximately 140 kDa that has been previously described as a natural posttranslational cleavage product in vivo. This fragment was confirmed to result from cleavage at two sites in the middle of the third fibronectin-like domain of L1. Cleavage at a further site, proximal to the transmembrane domain of L1, was also observed at higher plasmin concentrations. Plasmin was further confirmed to abrogate homophilic L1 interactions required for cellular aggregation. Based on these findings we propose that plasmin is likely to be an important regulator of L1-mediated processes including those documented in the nervous system.