Proteoglycans like syndecan-3 have complex signaling roles in addition to their function as structural components of the extracellular matrix. Here, we show that syndecan-3 in the lateral hypothalamus has an unexpected new role in limiting compulsive cocaine intake. In particular, we observe that syndecan-3 null mice self-administer greater amounts of cocaine than wild-type mice. This effect can be rescued by re-expression of syndecan-3 in the lateral hypothalamus with an adeno-associated viral vector. Adeno-associated viral vector delivery of syndecan-3 to the lateral hypothalamus also reduces motivation for cocaine in normal mice. Syndecan-3 limits cocaine intake by modulating the effects of glial-cell-line-derived neurotrophic factor, which uses syndecan-3 as an alternative receptor. Our findings indicate syndecan-3-dependent signaling as a novel therapeutic target for the treatment of cocaine addiction.