Chondroitin sulfate proteoglycans (CSPGs) present a barrier to axon regeneration. However, no specific receptor for the inhibitory effect of CSPGs has been identified. We showed that a transmembrane protein tyrosine phosphatase, PTPσ, binds with high affinity to neural CSPGs. Binding involves the chondroitin sulfate chains and a specific site on the first immunoglobulin-like domain of PTPσ. In culture, PTPσ^–/– neurons show reduced inhibition by CSPG. A PTPσ fusion protein probe can detect cognate ligands that are up-regulated specifically at neural lesion sites. After spinal cord injury, PTPσ gene disruption enhanced the ability of axons to penetrate regions containing CSPG. These results indicate that PTPσ can act as a receptor for CSPGs and may provide new therapeutic approaches to neural regeneration.