We have established a permanent cell line (CG-4) of rat central nervous system glial precursors from primary cultures of bipotential oligodendrocyte-type 2-astrocyte (O-2A) progenitor cells, which were kept proliferating with the mitogen(s) secreted by the neuronal B104 cell line. The CG-4 cells have a normal karyotype and display the properties of normal O-2A cells. CG-4 cells can be propagated in serum-free culture medium supplemented with medium conditioned by B104 cells for unrestricted periods of time as O-2A cells, characterized by the presence of the A2B5 surface marker and the absence of markers specific for oligodendrocytes (galactocerebroside, myelin basic protein) or type 2-astrocytes (glial acidic fibrillary protein). bFGF and PDGF are potent mitogens for CG-4 cells and their combination can substitute for the B104-derived mitogen(s). CG-4 cells are capable of differentiating into either oligodendrocytes or type 2-astrocytes. Differentiation into oligodendrocytes occurs after withdrawal of the mitogen. Replacement of the mitogen with fetal calf serum (20%), in contrast, induces 50% of the CG-4 cells to differentiate into type 2-astrocytes. Pure cultures of oligodendrocytes or type 2-astrocytes can be generated in substantial amounts from CG-4 cells and maintained for several weeks in medium containing 5% fetal calf serum.