The chondroitin sulfate proteoglycans (CSPGs) have been implicated as both positive and negative modulators of axonal growth; however, the functional properties of only a few specific CSPGs have been investigated. Here we demonstrate that NG2, an integral membrane CSPG expressed on the surfaces of glial progenitor cells, inhibits neurite growth from neonatal rat cerebellar granule neurons when presented to the cells as a component of the substrate. Growth inhibition occurred when NG2 was mixed with either laminin or L1, two potent promoters of axonal extension. Moreover, when given a choice between surfaces coated with NG2 and laminin or L1, the axons of the cerebellar neurons extended preferentially on laminin or L1 and avoided areas of the substrate containing NG2. The NG2 proteoglycan inhibited neurite growth after digestion with chondroitinase ABC, demonstrating that the inhibitory activity is a property of the core protein and not the covalently attached chondroitin sulfate glycosaminoglycan chains. NG2 also inhibited neurite growth from embryonic rat dorsal root ganglia neurons on substrates containing laminin. However, when the sensory neurons were plated onto surfaces containing the L1 glycoprotein and NG2, neurite growth was not inhibited. These results demonstrate that the NG2 proteoglycan provides an unfavorable substrate for axonal growth. Cells that express this proteoglycan in vivo may participate in axonal guidance by defining areas of the developing CNS that are nonpermissive for axonal extension from specific classes of developing neurons.