Although both c-Ret and GFRalpha1 are required for responsiveness to GDNF, GFRalpha1 is widely expressed in the absence of c-Ret, suggesting alternative roles for "ectopic" sites of GFRalpha1 expression. We show that GFRalpha1 is released by neuronal cells, Schwann cells, and injured sciatic nerve. c-Ret stimulation in trans by soluble or immobilized GFRalpha1 potentiates downstream signaling, neurite outgrowth, and neuronal survival, and elicits dramatic localized expansions of axons and growth cones. Soluble GFRalpha1 mediates robust recruitment of c-Ret to lipid rafts via a novel mechanism requiring the c-Ret tyrosine kinase. Activated c-Ret associates with different adaptor proteins inside and outside lipid rafts. These results provide an explanation for the tissue distribution of GFRalpha1, supporting the physiological importance of c-Ret activation in trans as a novel mechanism to potentiate and diversify the biological responses to GDNF.