Postsynaptic density protein-95 (PSD-95) is a central element of the postsynaptic architecture of glutamatergic synapses. PSD-95 mediates postsynaptic localization of AMPA receptors and NMDA receptors and plays an important role in synaptic plasticity. PSD-95 is released from postsynaptic membranes in response to Ca2+ influx via NMDA receptors. Here, we show that Ca2+/calmodulin (CaM) binds at the N-terminus of PSD-95. Our NMR structure reveals that both lobes of CaM collapse onto a helical structure of PSD-95 formed at its N-terminus (residues 1–16). This N-terminal capping of PSD-95 by CaM blocks palmitoylation of C3 and C5, which is required for postsynaptic PSD-95 targeting and the binding of CDKL5, a kinase important for synapse stability. CaM forms extensive hydrophobic contacts with Y12 of PSD-95. The PSD-95 mutant Y12E strongly impairs binding to CaM and Ca2+-induced release of PSD-95 from the postsynaptic membrane in dendritic spines. Our data indicate that CaM binding to PSD-95 serves to block palmitoylation of PSD-95, which in turn promotes Ca2+-induced dissociation of PSD-95 from the postsynaptic membrane.