Neon gas is commonly used in electric signs on Earth because of its intense glow.
Scientists have speculated on the presence of neon in the lunar atmosphere for decades.
"The presence of neon in the exosphere of the moon has been a subject of speculation since the Apollo missions, but no credible detections were made," said Mehdi Benna of Nasa's Goddard Space Flight Centre in Greenbelt, Maryland.
"We were very pleased to not only finally confirm its presence but to show that it is relatively abundant," added Benna, also from University of Maryland, Baltimore County.
There is not enough neon to make the moon visibly glow because the moon's atmosphere is extremely tenuous, about 100 trillion times less dense than Earth's atmosphere at sea level.
A dense atmosphere like Earth's is relatively rare in our solar system because an object has to be sufficiently massive to have enough gravity to hold onto it.
"It is critical to learn about the lunar exosphere before sustained human exploration substantially alters it," Benna noted.
Since the moon's atmosphere is so thin, rocket exhaust and outgassing from spacecraft could easily change its composition.
The Ladee confirms that the moon's exosphere is made up of mostly helium, argon and neon.
Their relative abundance is dependent on the time of day on the moon - argon peaks at sunrise, with neon at 4am, and helium at 1am.
The spacecraft conducted systematic measurements of these gases for seven months, which allowed the team to understand how these gases are supplied to the exosphere, and how they are ultimately lost.
It also revealed an unexpected source of some of the helium in the lunar exosphere.
This helium is being produced at a rate equivalent to about seven litres per second at standard atmospheric pressure.
"These discoveries highlight the limitations of current exospheric models, and the need for more sophisticated ones in the future," Benna concluded in a paper published in the journal Geophysical Research Letters.