Most adhesion-class G protein-coupled receptors (adhesion-GPCRs) undergo a novel self-catalytic cleavage at the GPCR proteolysis site (GPS) to form a hetero-dimeric complex containing the extracellular and seven-span transmembrane subunits. However, little is known about the role of GPS auto-proteolysis in the function of adhesion-GPCRs. Here we show that GPS cleavage is essential for the homotypic cell aggregation promoted by CD97 receptor, a leukocyte-restricted adhesion-GPCR often aberrantly expressed in carcinomas. We find that CD97 does not mediate cell aggregation directly. Instead, expression of the wild type – but not the GPS cleavage-deficient CD97 up-regulates the expression of N-cadherin, leading to Ca⁺⁺-dependent cell–cell aggregation. Our results provide a clear evidence for the role of GPS proteolytic modification in the cellular function of adhesion-GPCRs.