Proteoglycans have been suggested to play roles in pattern formation in the developing central nervous system. In the chick embryo, aggrecan, a chondroitin sulfate proteoglycan, has a regionally-specific and developmentally-regulated expression profile. Telencephalic neuronal cultures, when aggregated, exhibit aggrecan expression patterns comparable to those observed in vivo. The chicken mutation nanomelia produces a truncated aggrecan species that cannot be processed further and is not secreted. Neurons from normal and nanomelic chick embryo telencephalon were scored for aggregate formation and analyzed for distribution of aggrecan protein and expression of aggrecan mRNA. Distinctly different pattern formation, with respect to aggregate size (smaller) and number (fewer) were observed in poly-L-lysine plated neuronal cultures derived from nanomelic embryos when compared to those derived from normal embryos. Significantly, the nanomelic phenotype was subsequently rescued upon addition of the brain-specific form of aggrecan. Modulation of neuronal aggregate formation was mimicked by treatment with chondroitinase ABC but not other glycanases, and was rescued by addition of chondroitin 6-sulfate to the culture media. Lastly, although broad and diffuse distribution of aggrecan among the cell aggregates in the culture paradigm was observed by immunocytochemistry, mRNA in situ hybridization revealed that only a small population of cells in the center of the aggregates was responsible for the production of the secreted aggrecan found associated with neuronal aggregates. These studies suggest a function for aggrecan as a diffusible signal in CNS histomorphogenesis.