In cultured neurons, the exogenous application of neurotrophins (in homogenous concentrations) alters many features of axonal and dendritic arbors. In vivo, however, release of endogenous neurotrophins from neuronal processes creates spatially heterogeneous neurotrophin distributions. To probe the consequences of such endogenous neurotrophin distribution, we produced 'donor neurons' in ferret cortex brain slices that co-expressed brain-derived neurotrophic factor (BDNF) and red fluorescent protein (RFP). Using two-photon microscopy, we analyzed their effects on 'recipient neurons' that expressed green fluorescent protein (GFP) alone. BDNF released from dendrites and cell bodies acted directly on nearby recipient neurons to increase dendritic branching in a distance-dependent manner. Three-dimensional analysis of donor and recipient dendrites indicated that the BDNF source had to be within 4.5 microm to induce dendritic growth in the recipient neuron. Thus, BDNF released from an individual cell alters the structure of nearby dendrites on an exquisitely local scale.