Retinal pigment epithelial (RPE) cells form a functional complex with photoreceptor neurons of the retina, interacting through the interphotoreceptor matrix (IPM). We now provide evidence that the gene for pigment epithelium-derived factor (PEDF), a protein possessing neurotrophic and neuronal-survival activities, is highly expressed by both fetal and young adult RPE cells. PEDF mRNA is present in RPE cells of the human eye at 17 weeks of gestation, demonstrating its potential for action in vivo during early retinal development. The PEDF protein is secreted in vivo where it constitutes a part of the fetal and adult IPM surrounding photoreceptor outer segments. A polyclonal PEDF antibody recognizes at least four isoforms of secreted human and bovine PEDF by two dimensional gel analysis, and detects a similar 50 kDa protein in the IPM of several other vertebrate species. Within soluble extracts of RPE cells, however, where little, if any, of the 50 kDa species can be detected, an immunoreactive 36 kDa protein is observed by Western blot analysis. By immunofluorescence, PEDF is localized intracellularly in association with the nucleus, presumptive secretory granules, and cytoskeletal elements of cultured RPE cells with PEDF and actin antibodies colocalizing to the same cytoskeletal structures. During initial stages of attachment, PEDF and actin also concentrate at the tips of pseudopods extended by the cultured RPE cells. However, with successive passages, synthesis, and secretion of the PEDF protein as well as transcription of its mRNA decrease and are lost by about 10 passages. In parallel, cultured RPE cells lose their proliferative potential and change from an epithelial-like morphology in early passages to a more fibroblast-like appearance by about the 10th passage. PEDF is thus apparently present intracellularly and extracellularly in both fetal and early adult periods where it could be involved in cellular differentiation and survival and with its loss, in the onset of senescence.