The neural cell adhesion molecule (N-CAM) of rodents comprises three distinct proteins of Mr 180,000, 140,000, and 120,000 (designated N-CAM-180, -140, and -120). They are expressed in different proportions by different tissues and cell types. but the individual contribution of each form to cell adhesion is presently unknown. Previous studies have shown that the two N-CAM species of higher relative molecular mass span the membrane whereas N-CAM-120 lacks a transmembrane domain and can be released from the cell surface by phosphatidylinositol-specific phospholipase C. In this report, we provided evidence that N-CAM-120 contained covalently bound phosphatidylinositol and studied N-CAM-120 from its biosynthesis to its membrane insertion and finally to its release from the cell surface. Evidence was presented showing that the lipid tail of N-CAM-120 contained ethanolamine as is the case for other lipid-linked molecules. The phospholipid anchor was attached to the protein during the first minutes after completion of the polypeptide chain. This process took place in the endoplasmic reticulum as judged from endoglycosidase H digestion experiments. Immediately after a 2-min pulse with [35S]methionine, we detected also a short-lived precursor that had not yet acquired the lipid tail. Pulse-chase studies established that N-CAM-120 was transported to the cell surface from which it was slowly released into the extracellular milieu. The molecules recovered in the incubation medium appeared to have lost all of their bound fatty acid but only around half of the ethanolamine. Upon fractionation of brain tissue, approximately 75% of N-CAM-120 was recovered with a membrane fraction and approximately 25% in a membrane-free supernatant. A small proportion (approximately 6%) was found to be resistant to extraction by non-ionic detergent. A major posttranslational modification of N-CAM is polysialylation. Our results showed that also N-CAM-120 was polysialylated in the young postnatal brain and released in this form from cultured cerebellar cells. The presence of N-CAM in a form that can be released from the cell surface and accumulates in the extracellular fluid suggests a novel mechanism by which N-CAM-mediated adhesion may be modulated.