Chondroitin sulfate proteoglycans (CSPGs) are components of the extracellular matrix that inhibit axonal sprouting and experience-dependent plasticity. Although protein-tyrosine phosphatase σ (PTPσ) has been proven to be a receptor for CSPGs, its downstream signaling has remained a mystery. Here, we show that CSPGs target and dephosphorylate tropomyosin-related kinase B, the receptor of brain-derived neurotrophic factor (BDNF), via PTPσ in embryonic cortical neurons in vitro. Whereas BDNF promoted dendritic spine formation in embryonic cortical neurons, CSPGs abolished the effects of BDNF and eliminated existing dendritic spines when BDNF was present. The latter effect was dependent on the p75 receptor, presumably because BDNF binding to the p75 receptor elicits elimination of dendritic spines. These results suggest that the inhibitory activity of CSPGs on dendritic spine formation operates through the targeting of neurotrophins at the receptor level.