GPR56 is a member of the adhesion G protein-coupled receptor (GPCR) family. Despite the importance of GPR56 in brain development, where mutations cause a devastating human brain malformation called bilateral frontoparietal polymicrogyria (BFPP), the signaling mechanism(s) remain largely unknown. Like many other adhesion GPCRs, GPR56 is cleaved via a GPCR autoproteolysis-inducing (GAIN) domain into N- and C-terminal fragments (GPR56^N and GPR56^C); however, the biological significance of this cleavage is elusive. Taking advantage of the recent identification of a GPR56 ligand and the presence of BFPP-associated mutations, we investigated the molecular mechanism of GPR56 signaling. We demonstrate that ligand binding releases GPR56^N from the membrane-bound GPR56^C and triggers the association of GPR56^C with lipid rafts and RhoA activation. Furthermore, one of the BFPP-associated mutations, L640R, does not affect collagen III-induced lipid raft association of GPR56. Instead, it specifically abolishes collagen III-mediated RhoA activation. Together, these findings reveal a novel signaling mechanism that may apply to other members of the adhesion GPCR family.