Dendritic spines are small protrusions that receive synapses, and changes in spine morphology are thought to be the structural basis for learning and memory. We demonstrate that the cell surface heparan sulfate proteoglycan syndecan-2 plays a critical role in spine development. Syndecan-2 is concentrated at the synapses, specifically on the dendritic spines of cultured hippocampal neurons, and its accumulation occurs concomitant with the morphological maturation of spines from long thin protrusions to stubby and headed shapes. Early introduction of syndecan-2 cDNA into immature hippocampal neurons, by transient transfection, accelerates spine formation from dendritic protrusions. Deletion of the COOH-terminal EFYA motif of syndecan-2, the binding site for PDZ domain proteins, abrogates the spine-promoting activity of syndecan-2. Syndecan-2 clustering on dendritic protrusions does not require the PDZ domain-binding motif, but another portion of the cytoplasmic domain which includes a protein kinase C phosphorylation site. Our results indicate that syndecan-2 plays a direct role in the development of postsynaptic specialization through its interactions with PDZ domain proteins.