Neural cell adhesion molecule Ll is a cell surface glycoprotein required for the correct development of the nervous system. Ll exists as two isoforms encoded by mRNA species that either collectively incorporate or exclude exons 2 and 27. Neurons utilize only the full-length isoform, whereas Schwann cells, kidney cells, and blood lymphocytes only express the short form of L1. Still other cells, oligodendrocytes, regulate Ll isoform expression in a maturation-dependent manner. The RSLE motif encoded by exon 27 is known to have a role in clathrin-mediated endocytosis of L1, but the function of the exon 2-encoded motif (YEGHHV) is unknown. Here we show that this motif is required for the optimal binding of Ll to several neural ligands and is likely to be important for nervous system development. Thus, alternative use of exon 2 is a mechanism for regulating ligand interactions with L1.