Syndecan-3 (N-syndecan) is a transmembrane heparan sulfate proteoglycan abundantly expressed in developing brain. In addition to acting as a coreceptor, syndecan-3 acts as a signaling receptor upon binding of its ligand HB-GAM (heparin-binding growth-associated molecule; pleiotrophin), which activates the cortactin-src kinase signaling pathway. This leads to rapid neurite extension in neuronal cells, which makes syndecan-3 as an interesting transmembrane receptor in neuronal development and regeneration. However, little is known about the signaling mechanism of syndecan-3. Here we have analyzed formation of ligand-N-syndecan signaling complexes at the cell surface using fluorescence resonance energy transfer (FRET) and bioluminescence resonance energy transfer (BRET). We show that ligand binding leads to dimerization of syndecan-3 at the cell surface. The dimerized syndecan-3 colocalizes with actin in the filopodia of cells. Several amino acid residues (K383, G392 and G396) in the transmembrane domain are shown to be important for the ligand-induced dimerization, whereas the cytosolic domain is not required for the dimerization.