Overexpression or clustering of the transmembrane form of the extracellular matrix heparan sulfate proteoglycan agrin (TM-agrin) induces the formation of highly dynamic filopodia-like processes on axons and dendrites from central and peripheral nervous system-derived neurons. Here we show that the formation of these processes is paralleled by a partitioning of TM-agrin into lipid rafts, that lipid rafts and transmembrane-agrin colocalize on the processes, that extraction of lipid rafts with methyl-beta-cyclodextrin leads to a dose-dependent reduction of process formation, that inhibition of lipid raft synthesis prevents process formation, and that the continuous presence of lipid rafts is required for the maintenance of the processes. Association of TM-agrin with lipid rafts results in the phosphorylation and activation of the Src family kinase Fyn and subsequently in the phosphorylation and activation of MAPK. Inhibition of Fyn or MAPK activation inhibits process formation. These results demonstrate that the formation of filopodia-like processes by TM-agrin is the result of the activation of a complex intracellular signaling cascade, supporting the hypothesis that TM-agrin is a receptor or coreceptor on neurons.