During the development of the CNS, a salient issue is whether neuronal phenotype is defined by the lineage or by the environment of precursor cells. Transplants permit these two possibilities to be tested, as cell fate can be examined in a new location. Dissociated cerebellar cells from newborn rats treated with tritiated thymidine or from NSE-lacZ transgenic mice were grafted into the dentate gyrus of the developing hippocampus. Implanted cells integrated into the granule cell layer, which contains the cell bodies of host granule neurons. Immunohistochemistry showed that grafted cells in the granule cell layer, like the host hippocampal granule neurons, were calbindin positive and upregulated FOS in a seizure paradigm. Electron microscopic analysis also showed that cells grafted to the dentate gyrus share features with host dentate neurons. These assays indicate that transplanted cerebellar cells acquired morphological and antigenic features characteristic of hippocampal neurons. These results show that metencephalic precursors are capable of differentiating in response to signals in the telencephalon, suggesting that the environment controls the regional fate of neuronal precursor cells during neurogenesis.