Punctin/MADD-4, a member of the ADAMTSL extracellular matrix protein family, was identified as an anterograde synaptic organizer in the nematode Caenorhabditis elegans. At GABAergic neuromuscular junctions, the short isoform MADD-4B binds the ectodomain of neuroligin NLG-1, itself a postsynaptic organizer of inhibitory synapses. To identify the molecular bases of their partnership, we generated recombinant forms of the two proteins and carried out a comprehensive biochemical and biophysical study of their interaction, complemented by an in vivo localisation study. We show that spontaneous proteolysis of MADD-4B first generates a shorter N-MADD-4B form, which comprises four thrombospondin (TSP) and one Ig-like domains and binds NLG-1. A second processing event eliminates the C-terminal Ig-like domain along with the ability of N-MADD-4B to bind NLG-1. These data identify the Ig-like domain as the primary determinant for N-MADD-4B interaction with NLG-1 in vitro. We further demonstrate in vivo that this Ig-like domain is essential for efficient recruitment of GABAA receptors at GABAergic synapses in C. elegans. The interaction of N-MADD-4B with NLG-1 is also disrupted by heparin, used as a surrogate for the extracellular matrix component, heparan sulphate, and whose high-affinity binding to the Ig-like domain may proceed from surface charge complementarity, as suggested by homology 3D modelling. These data point to N-MADD-4B processing and cell-surface proteoglycan binding as two possible mechanisms that can regulate the interaction between MADD-4B and NLG-1 at GABAergic synapses.