Matrix metalloproteinase (MMP)-2 and -9 are pivotal in remodeling many tissues. However, their functions and candidate substrates for brain development are poorly characterized. Intercellular adhesion molecule-5 (ICAM-5; Telencephalin) is a neuronal adhesion molecule that regulates dendritic elongation and spine maturation. We find that ICAM-5 is cleaved from hippocampal neurons when the cells are treated with N-methyl-D-aspartic acid (NMDA) or alpha-amino-3-hydroxy5-methylisoxazole-propionic acid (AMPA). The cleavage is blocked by MMP-2 and -9 inhibitors and small interfering RNAs. Newborn MMP-2- and MMP-9-deficient mice brains contain more full-length ICAM-5 than wild-type mice. NMDA receptor activation disrupts the actin cytoskeletal association of ICAM-5, which promotes its cleavage. ICAM-5 is mainly located in dendritic filopodia and immature thin spines. MMP inhibitors block the NMDA-induced cleavage of ICAM-5 more efficiently in dendritic shafts than in thin spines. ICAM-5 deficiency causes retraction of thin spine heads in response to NMDA stimulation. Soluble ICAM-5 promotes elongation of dendritic filopodia from wild-type neurons, but not from ICAM-5-deficient neurons. Thus, MMPs are important for ICAM-5-mediated dendritic spine development.