REK7 is an Eph-related tyrosine kinase receptor expressed exclusively in the nervous system, predominantly in hippocampus and cortex. A soluble REK7-IgG fusion protein, produced to analyze the biological role of REK7, prevents axon bundling in cocultures of cortical neurons with astrocytes, a model of late stage nervous system development and differentiation. Using REK7-IgG as an affinity reagent, we purified and cloned a novel REK7 ligand called AL-1, a GPI-linked protein homologous to other members of an emerging ligand family. Membrane attachment of AL-1 appears necessary for receptor activation, since REK7 on cortical neurons is efficiently activated by transfected cells expressing GPI-linked AL-1, but not by soluble AL-1. Consistent with this, soluble AL-1 blocks axon bundling. Our findings, together with the observation that both molecules are expressed in the brain, suggest a role in the formation of neuronal pathways, a crucial feature of nervous system development and regeneration.