Apolipoprotein-E (apoE) is a glycoprotein highly expressed in the brain, where it appears to play a role in lipid transport, β-amyloid clearance, and neuronal signaling. ApoE proteolytic fragments are also present in the brain, but the enzymes responsible for apoE fragmentation are unknown, and the biological activity of specific apoE fragments remains to be determined. Here we utilized SK-N-SH neuroblastoma cells differentiated into neurons with all-trans-retinoic acid (ATRA) to study extracellular apoE proteolysis. ApoE fragments were detectable in culture supernatants after 3 days, and their levels were increased for up to 9 days in the presence of ATRA. The concentration of apoE fragments was positively correlated with levels of the neuronal maturation markers (PSD95 and SMI32). The most abundant apoE fragments were 25- and 28-kDa N-terminal fragments that both contained sialylated glycosylation and bound to heparin. We detected apoE fragments only in the extracellular milieu and not in cell lysates, suggesting that an extracellular protease contributes to apoE fragmentation. Of note, siRNAmediated knockdown of high-temperature requirement serine peptidase A1 (HtrA1) and a specific HtrA1 inhibitor reduced apoE 25-kDa fragment formation by 41 and 86%, respectively. Recombinant 25-kDa fragment apoE and full-length apoE both stimulated neuritogenesis in vitro, increasing neuroblastoma neurite growth by more than 2-fold over a 6-day period. This study provides a cellular model for assessing apoE proteolysis, indicates that HtrA1 regulates apoE 25-kDa fragment formation under physiological conditions, and reveals a new neurotrophic function for the apoE 25-kDa fragment.