The effect of constitutively expressed N-myc gene on nerve growth factor (NGF) induced neuronal differentiation was investigated. B104, a rat central nervous system-derived cell line and its N-myc gene expressing derivative lines (C6, C7) (Bernards et al., 1986), were stably transfected with the trkA proto-oncogene and independent clones for each cell line were analysed. NGF induced phosphorylation of the trkA receptor, activated a cascade of cellular intermediaries such as phospholipase C gamma 1 and ERK proteins, and stimulated c-fos gene transcription in all trkA-expressing clones. NGF-mediated neuronal differentiation was observed solely in trkA-expressing B104-derived clones and was characterized by reduced cell growth, activation of NGF-regulated genes, and downregulation of the endogenous low-affinity NGF receptor gene (gp75NGFR). No such phenotypical changes occurred in trkA-expressing C6 or C7-derived clones following NGF treatment. These results are consistent with the hypothesis that constitutive expression of N-myc inhibits exit from cell cycle and blocks neuronal cell differentiation.