The failure of axon regeneration at injury sites in the central nervous system is due, at least in part, to the formation of a growth-inhibitory environment. The glial scar formed at injury sites contains numerous growth-inhibitory molecules whose intracellular signaling mechanisms remain largely unknown. Here, I provide evidence that the polarity machinery, consisting of atypical PKC, PAR6 and PAR3, mediates axon growth inhibition induced by NG2, a major chondroitin sulfate proteoglycan in the glial scar. NG2 activates aPKC. Inhibition of aPKC reduces the inhibitory action of NG2. Phosphomimetic forms of aPKC are sufficient for axon growth inhibition. NG2 activates Cdc42. This activation is required for aPKC activation and growth inhibition. NG2 increases the association of aPKC with PAR6 and this interaction is also required for NG2-induced inhibition. The aPKC-binding region of PAR3 contains an aPKC phosphorylation site that is critical for the regulation and function of the PAR complex. NG2 decreases the association of aPKC with PAR3. Blocking aPKC activity prevents this decrease and a non-phosphorylatable mutant form of PAR3 reverses NG2-mediated axon growth inhibition. NG2 also induces the dislocation of PAR3 to the cell body, suggesting dysfunctional regulation of PAR3. Rac1 signaling is a downstream event regulated by PAR3. NG2 activates Rac1 in an aPKC- and PAR3-dependent manner. A dominant negative form of Rac1 reverses axon growth inhibition whereas a constitutively active form of Rac1 attenuates axon outgrowth. These together suggest that hyperactivity of Rac1 is involved in the inhibitory effect of NG2. Ceramide activates aPKC. I therefore evaluated the role of ceramide in axon growth inhibition. Ceramide inhibits axon growth in aPKC-dependent manner. Blocking ceramide signaling reduces the inhibitory effect of NG2. These together suggest that ceramide signaling may be upstream of the PAR complex in a pathway that mediates axon growth inhibition. In summary, my research characterized the intracellular signaling mechanisms of axon growth inhibition by NG2. I speculate that NG2 triggers ceramide signaling to induce hyperactivity and dislocation of Rac1 through the PAR complex. This dysfunctional regulation of Rac1 may cause axon growth inhibition. These results define a new therapeutic target for axon regeneration after CNS injury.