NCAM plays a key role in neural development and plasticity-mediating cell adhesion and differentiation mainly through homophilic binding. Until recently, attempts to modulate neuronal differentiation and plasticity through NCAM have been impeded by the absence of small synthetic agonists mimicking homophilic interactions of NCAM. We show here that a peptide, P2, corresponding to a 12-amino acid sequence localized in the FG loop of the second Ig module of NCAM, binds to the first Ig module, which is the natural binding partner of the second Ig module, with an apparent K(d) of 4.7 +/- 0.9 x 10(-6) m. P2 inhibits cell aggregation and induces neurite outgrowth from hippocampal neurons, maximal neuritogenic effect being obtained at a concentration of 0.8 microm. The neuritogenic effect was inhibited by preincubation of P2 with the recombinant NCAM-IgI. Both the length of P2 and the basic amino acid residues at the N and C termini are important for its neuritogenic activity. Treatment of hippocampal cultures with P2 results in induction of phosphorylation of the mitogen-activated protein kinases ERK1 and ERK2. Thus, P2 is a potent mimetic of NCAM, and therefore, an attractive compound for the development of drugs for the treatment of neurodegenerative diseases.