Synaptic adhesion molecules are thought to contribute to the development, function, and plasticity of neuronal synapses largely through their trans-synaptic synaptic adhesions. I found here that NGL-3 (netrin-G ligand-3), a postsynaptic adhesion molecule that trans-synaptically interacts with the LAR family of receptor tyrosine phosphatases and intracellularly with the postsynaptic scaffolding protein PSD-95, undergoes a proteolytic cleavage process. NGL-3 cleavage is induced by NMDA treatment in cultured neurons or low frequency stimulation in brain slices, and requires the activities of NMDA glutamate receptors, matrix metalloproteinases (MMPs), and presenilin/$\gamma$-secretase. NGL-3 mutant (Ngl3$^{-/-}$ mice) mice show normal synaptic transmission, but impaired long term potentiation and depression. Behaviorally, Ngl3$^{-/-}$ mice showed hyperactivity, anxiolytic-like behaviors, and impaired learning and memory. Hyperactivity of Ngl3$^{-/-}$ mice is partially rescued by D-cycloserine, a partial NMDA receptor agonist, whereas anxiolytic-like behaviors are not. These results suggest that NGL-3 is a novel substrate of MMPs and $\gamma$-secretase and that NGL-3 cleavage may regulate synaptic adhesion during NMDA-dependent LTD. NGL-3 is important for normal brain development, synaptic plasticity, locomotion, anxiety-like behavior, and learning and memory in vivo. Lastly, these results suggest that reduced NMDA receptor activity may lead to hyperactivity in Ngl3$^{-/-}$ mice.