Receptor tyrosine phosphatase sigma (RPTPσ) plays an important role in the regulation of axonal outgrowth and neural regeneration. Recent studies have identified two RPTPσ ligands, chondroitin sulfate proteoglycans (CSPGs) and heparan sulfate proteoglycans (HSPG), which can modulate RPTPσ activity by affecting its dimerization status. Here, we developed a split luciferase assay to monitor RPTPσ dimerization in living cells. Using this system, we demonstrate that heparin, an analog of heparan sulfate, induced the dimerization of RPTPσ, whereas chondroitin sulfate increased RPTPσ activity by inhibiting RPTPσ dimerization. Also, we generated several novel RPTPσ IgG monoclonal antibodies, to identify one that modulates its activity by inducing/stabilizing dimerization in living cells. Lastly, we demonstrate that this antibody promotes neurite outgrowth in SH-SY5Y cells. In summary, we demonstrated that the split luciferase RPTPσ activity assay is a novel high-throughput approach for discovering novel RPTPσ modulators that can promote axonal outgrowth and neural regeneration.