N-Acetyl-L-aspartate (NAA) and its derivative N-acetylaspartylglutamate (NAAG) are major osmolytes present in the vertebrate brain. Although they are synthesized primarily in neurons, their function in these cells is unclear. In the brain, these substances undergo intercompartmental cycles in which they are released by neurons in a regulated fashion and are then rapidly hydrolyzed by catabolic enzymes associated with glial cells. Recently, the catabolic enzyme for NAA hydrolysis has been found to be expressed only in oligodendrocytes, and the catabolic enzyme for NAAG expressed only in astrocytes. These results indicate an unusual tricellular metabolic sequence for the synthesis and hydrolysis of NAAG wherein it is synthesized in neurons from NAA and L-glutamate, hydrolyzed to NAA and L-glutamate by astrocytes, and further hydrolyzed to L-aspartate and acetate by oligodendrocytes. Since the discovery that the NAA and NAAG anabolic products of neurons are specifically targeted to oligodendrocytes and astrocytes, respectively, this unique metabolic compartmentalization also suggests that these substances may play an important role in cell-specific glial signaling. In this review, it is hypothesized that a key function of NAA and NAAG in the vertebrate brain is in cell signaling and that these substances are important in the regulation of interactions of brain cells and in the establishment and maintenance of the nervous system.