Cells can release membrane components in a soluble form and as membrane vesicles. L1, an important molecule for cell migration of neural and tumor cells, is released by membrane‐proximal cleavage, and soluble L1 promotes cell migration. Release of L1 is enhanced by shedding inducers such as phorbol ester and pervanadate, but it is also enhanced by depletion of cellular cholesterol with methyl‐β‐cyclodextrin (MCD). How such different compounds can induce shedding is presently unknown. We show here that ADAM10 is involved in L1 cleavage, which occurs at the cell surface and in the Golgi apparatus. MCD and pervanadate treatment induced the release of microvesicles containing full‐length L1 and the active form of ADAM10. L1 cleavage occurred in isolated vesicles. L1‐containing microvesicles could trigger haptotactic cell migration. Only the neural L1 form carrying the RSLE signal for clathrin‐dependent endocytosis was recruited and cleaved in vesicles. Phorbol ester treatment activated L1 cleavage predominantly at the cell surface. Our results provide evidence for two pathways of L1 cleavage, based on ADAM10 localization, that can be activated differentially: 1) direct cleavage at the cell surface, and 2) release and cleavage in secretory vesicles most likely derived from the Golgi apparatus. The findings establish a novel role for ADAM10 as a vesicle‐based protease.