Mouse embryonic stem cells treated with retinoic acid are induced to differentiate into neuron-like cells (Bain et al. (1995) Dev. Biol. 168, 342-357). Here we have examined the expression of a set of neural- and mesoderm-specific genes during this in vitro differentiation process. mRNAs encoding the neural genes Wnt-1, MASH1, the light and medium isoforms of neurofilaments, and the neurotransmitter-synthesizing enzyme glutamic acid decarboxylase are all strongly upregulated by retinoic acid treatment; expression of these genes occurs in a temporal pattern resembling that in the developing brain. In contrast, retinoic acid blocks the expression of the mesodermal genes Brachyury, cardiac actin, and zeta-globin. Thus, retinoic acid exerts both pro-neuronal and anti-mesodermal activities on mouse embryonic stem cells in culture.