We have been studying a population of bipotential glial progenitor cells in the perinatal rat optic nerve and brain in an attempt to understand how cells choose between alternative fates in the developing mammalian central nervous system (CNS). This cell population gives rise initially to oligodendrocytes and then to type-2 astrocytes, both of which apparently collaborate in sheathing axons in the CNS. In vitro studies suggest that oligodendrocyte differentiation is the constitutive pathway of development for the oligodendrocyte-type-2-astrocyte (O-2A) progenitor cell, whereas type-2 astrocyte differentiation depends on a specific inducing protein. This protein is present in the developing optic nerve when type-2 astrocytes are differentiating and can induce O-2A progenitor cells in vitro to express glial fibrillary acidic protein (GFAP), a marker of astrocyte differentiation. Here we show that the type-2-astrocyte-inducing protein is similar or identical to ciliary neutrotrophic factor (CNTF), which promotes the survival of some types of peripheral neurons in vitro, including ciliary ganglion neurons. This suggests that CNTF, in addition to its effect on neurons, may be responsible for triggering type-2 astrocyte differentiation in the developing CNS.