The three known inhibitors of axonal regeneration present in myelin-MAG, Nogo, and OMgp-all interact with the same receptor complex to effect inhibition via protein kinase C (PKC)-dependent activation of the small GTPase Rho. The transducing component of this receptor complex is the p75 neurotrophin receptor. Here we show that MAG binding to cerebellar neurons induces alpha- and then gamma-secretase proteolytic cleavage of p75, in a protein kinase C-dependent manner, and that this cleavage is necessary for both activation of Rho and inhibition of neurite outgrowth.