Phosphacan, one of the principal proteoglycans in the extracellular matrix of the central nervous system, is implicated in neuron-glia interactions associated with neuronal differentiation and myelination. We report here the identification of a novel truncated form of phosphacan, phosphacan short isoform (PSI), that corresponds to the N-terminal carbonic anhydrase- and fibronectin type III-like domains and half of the spacer region. The novel cDNA transcript was isolated by screening of a neonatal brain cDNA expression library using a polyclonal antibody raised against phosphacan. Expression of this transcript in vivo was confirmed by Northern blot hybridization. Analysis of brain protein extracts reveals the presence of a 90-kDa glycosylated protein in the phosphate-buffered saline-insoluble 100000 x g fraction that reacts with antisera against both phosphacan and a recombinant PSI protein and that has the predicted N-terminal sequence. This protein is post-translationally modified with oligosaccharides, including the HNK-1 epitope, but, unlike phosphacan, it is not a proteoglycan. The expression of the PSI protein varies during central nervous system development in a fashion similar to that observed for phosphacan, being first detected around embryonic day 16 and then showing a dramatic increase in expression to plateau around the second week post-natal. Both the native and recombinant PSI protein can interact with the Ig cell adhesion molecules, F3/contactin and L1, and in neurite outgrowth assays, the PSI protein can promote outgrowth of cortical neurons when used as a coated substrate. Hence, the identification of this novel isoform of phosphacan/receptor protein tyrosine phosphatase-beta provides a new component in cell-cell and cell-extracellular matrix signaling events in which these proteins have been implicated.