In addition to a nonadecapeptide homologous to the teleost melanin-concentrating hormone (MCH), the amino acid sequence predicted from a rat prepro-MCH (ppMCH) cDNA suggested that at least one (neuropeptide EI, or NEI), and possibly a second (NGE), additional neuropeptide may be encoded by this precursor. Cross-reactivity with epitopes of NEI or NGE can account for reported localization of alpha-MSH, rat CRF, and human GRF in rat dorsolateral hypothalamic neurons. We have used antisera raised against rat MCH and NEI in immunohistochemical studies at the light and electron microscopic levels, along with hybridization histochemical localization of ppMCH mRNA, to define the organization of this system. As expected, ppMCH mRNA is prominently expressed in cells in the lateral hypothalamic area and zona incerta. The MCH and NEI peptides were extensively colocalized in neurons in both of these areas. In addition, smaller cell groups in the olfactory tubercle and pontine tegmentum were also positively hybridized for ppMCH mRNA and immunostained for MCH and NEI. Fibers stained for MCH and NEI were similarly, and very broadly, distributed throughout the central nervous system in patterns that generally conformed with known projection fields of the lateral hypothalamic area and zona incerta. A differential distribution was seen in at least one region, the interanterodorsal nucleus of the thalamus, which contained a prominent terminal field stained for MCH but not NEI. At the electron microscopic level, MCH-stained perikarya displayed a prominent staining associated with the Golgi apparatus; this was not encountered in NEI-stained cells. Both peptides were distributed similarly in terminals in the lateral hypothalamic area and median eminence, with staining associated principally with dense-cored vesicles. The results suggest that ppMCH-derived peptides may serve as neurotransmitters or modulators of prominence in a surprisingly expansive projection field of incerto-hypothalamic neurons. The terminal distributions of this system seem most compatible with functional roles in generalized arousal and sensorimotor integration, processes previously implicated as being subject to modulation by the lateral hypothalamic area.