The function of truncated trkB receptors during nervous system plasticity and regeneration is currently unknown. The extensive nonneuronal localization of truncated trkB-T1 receptors, coupled with their up-regulation by CNS glial cells in response to injury, has led to the speculation that these receptors may sequester BDNF and NT-4/5 to reduce their local availability and, thus, limit axonal sprouting. Conversely, trkB-T1 receptors could bind and present neurotrophins to injured axons and facilitate their regeneration in a manor analogous to that proposed for p75(NTR) receptors on Schwann cells. To address this issue, we used an in vitro coculture paradigm in which wild-type 3T3 NIH fibroblasts or two different 3T3 cell clones stably expressing trkB-T1 receptors served as monolayer substrates upon which to evaluate the effect of trkB-T1 receptors on nonneuronal cells to influence neurotrophin (NGF, BDNF, NT-3, and NT-4/5)-induced neurite outgrowth from retinoic acid (RA)-treated SY5Y neuroblastoma cells. In these experiments, BDNF and NT-4/5 produce a strong phosphorylation of trk receptors on the RA-SY5Y cells and induce differentiation of the SY5Y cells (as measured by the development of neurofilament-positive neuritic processes). This ability of the trkB ligands to stimulate neurite outgrowth is dose dependent since increasing concentrations of BDNF (5, 25, and 100 ng/ml) result in an increased percentage of SY5Y cells developing neurites and in progressively longer neurites from SY5Y cells on the control 3T3 monolayers. In these experiments, BDNF and NT-4/5 induce the strongest neurite outgrowth, followed by NT-3 and then NGF. When trkB-T1 receptors are present on the 3T3 cell substratum both BDNF- and NT-4/5-induced neurite extension from the SY5Y cells are strongly inhibited. In contrast, NGF-induced neurite growth is unaffected and NT-3-associated growth is somewhat reduced. These results suggest that the inhibitory effect of the trkB-T1 receptors on the nonneuronal cell substrates is selective for neurite outgrowth that is mediated via the trkB-kinase receptors on the neuroblastoma cells. This ability of trkB-T1 receptors on the nonneuronal substratum to inhibit BDNF-induced neurite outgrowth can be overcome by the addition of high concentrations of BDNF (1 microg/ml). Binding assays using 125I-BDNF suggest that this inhibitory effect could be mediated via binding and internalization of BDNF by the trkB-T1 receptors on the 3T3 cells. These results provide strong support for the hypothesis that the up-regulation of trkB-T1 receptors on astrocytes following CNS lesions enhances the sequestration of the trkB ligands, BDNF and NT- 4/5, at the site of reactive gliosis and, thus, contributes to the inhibition of CNS axonal regeneration from neurons expressing trkB-kinase receptors by removing their ligands from the extracellular environment.