The differentiation of presumptive neural retina following its isolation from rat embryos and growth in explant and monolayer culture has been studied to obtain information regarding the extent to which factors extrinsic and intrinsic to the retina participate in determining molecular and cytological differentiation. Explanted retinal epithelium retained the capacity for mitosis, as shown by [3H]thymidine incorporation, and from the undifferentiated neuroepithelium, retinal cell-types emerged and acquired a laminar organization resembling that in vivo. Characterization of rod photoreceptor cells at both the light and electron microscopic level showed that these cells exhibit differentiated structural features including inner segments, connecting cilia and membranous expansions suggestive of forming outer segments. Immunofluorescent labeling with an antibody to a synaptic vesicle protein, and electron microscopic identification of synaptic elements showed formation of synapses by the photoreceptor cells within the explant. Neurites extending from the explants exhibited growth on laminin, fibronectin and collagen substrates. Since the neurites immunolabeled with antibodies to the 140 kDa subunit of neurofilament and with antibodies to Thy-1, they could be identified as axons of ganglion cells. Antibodies to a variety of cell-type specific antigens showed that the cells expressed molecules associated with the fully differentiated cell. Furthermore, since our approach has been to explant embryonic retina at an age when the antigens are not yet expressed in vivo, the appearance of the antigens in culture represented de novo expression. In contrast, neural retinal cells in dissociated cultures did not exhibit de novo expression of differentiated molecular properties.(ABSTRACT TRUNCATED AT 250 WORDS)