Long-term potentiation (LTP) is thought to be particularly important in the acquisition of hippocampus-associated memory, in part because it develops quickly and persists for indefinite periods. Extracellular proteolysis has been hypothesized to contribute to LTP by modifying adhesive relations of synapses and thus the morphology of excitatory synapses. Here we report that neuropsin (NP), an extracellular serine protease, is critically involved in the formation of both the potentiation effect and hippocampus-dependent forms of memory. NP-knockout mice were significantly impaired in the Morris water maze and Y-mazes and failed to exhibit early phase LTP induced by a single tetanus. Potentiation was also impaired or completely blocked by in vivo application of a specific inhibitor or a neutralizing monoclonal antibody for NP. Intriguingly, recombinant (r-) NP alone, without tetanic stimulation, elicited either long-lasting potentiation or depression, depending on the applied dose. The r-NP-elicited potentiation was occluded by prior induction of LTP, while theta-burst-elicited LTP was occluded by application of r-NP alone, suggesting that the two forms of plasticity have a common signalling pathway. r-NP-elicited potentiation and depression increased phosphorylation at different sites on the GluR1 subunit of the AMPA receptor that had previously been associated with LTP or long-term depression. Thus, we conclude that NP is necessary for establishment of LTP and has a significant role in memory acquisition.