The neurotrophin receptor p75^NTR is involved in the regulation of axonal elongation by neurotrophins as well as several myelin components, including Nogo, myelin-associated glycoprotein (MAG) and myelin oligodendrocyte glycoprotein (OMgp). Neurotrophins stimulate neurite outgrowth by inhibiting Rho activity, whereas myelin-derived proteins activate RhoA and thereby inhibit growth. Here we show that direct interaction of the Rho GDP dissociation inhibitor (Rho-GDI) with p75^NTR initiates the activation of RhoA, and this interaction between p75^NTR and Rho-GDI is strengthened by MAG or Nogo. We also found that p75^NTR facilitates the release of prenylated RhoA from Rho-GDI. The peptide ligand that is associated with the fifth α helix of p75^NTR inhibits the interaction between Rho-GDI and p75^NTR, thus silencing the action mediated by p75^NTR. This peptide has potential as a therapeutic agent against the inhibitory cues that block regeneration in the central nervous system.