Unlike mammals, lower vertebrates can regenerate an injured optic nerve and other pathways of the CNS throughout life. We report here that in dissociated cell culture, goldfish retinal ganglion cells regenerate their axons in response to two factors derived from the sheath cells of the optic nerve. Axogenesis factor 1 (AF-1) is a small peptide (700–900 Da) that is inactivated by treatment with proteinase K but heat stable. A second factor, AF-2, is a polypeptide of ca 12 kDa. In the absence of these factors, dissociated retinal cells remained viable in serum-free, defined media for at least a week but showed little outgrowth, as visualized using the vital dye 5,6-carboxyfluorescein diacetate (5,6- CFDA). The addition of AF-1 induced up to 25% of cells in culture to extend processes > 75 microns in length by 6 d; AF-2 had a lesser but highly significant effect. To verify that neurite outgrowth was from retinal ganglion cells per se, we applied the lipophilic dye 4-Di-10- ASP to the optic tectum and allowed it to diffuse up the optic nerve for several days before culturing the retina. A far greater percentage of cells containing the dye showed axonal outgrowth than was observed from the overall cell population, indicating that ganglion cells are selective targets of the factors. The effects of AF-1 or AF-2 were not secondary to enhanced viability, since neither overall cell survival nor the number of retinal ganglion cells remaining in culture after 6 d was affected by the presence of the factors. The activity of AF-1 and AF-2 was not mimicked by several defined factors tested over a broad concentration range, for example, NGF, BDNF, NT-3, CNTF, taurine, retinoic acid, acidic or basic fibroblast growth factors. The concentration of AF-1 is considerably higher in CM than in optic nerve homogenates, suggesting that it is actively secreted; AF-2 has a similar concentration intra- and extracellularly. Insofar as AF-1 and AF-2 derive from cells of the optic nerve and act upon retinal ganglion cells, they are likely to be important in inducing optic nerve regeneration in vivo.