Adhesion molecules play important roles in the development and regeneration of the CNS and PNS. We found that the immunoglobulin superfamily recognition molecule L1 influences proliferation and differentiation of neural precursor cells. Substrate-coated L1 reduced proliferation of precursor cells in a dose-dependent manner and increased neuronal and decreased astrocytic differentiation when compared with poly-l-lysine or laminin substrates. Enhancement of neuronal differentiation was more effective if L1 was offered via the cell surface of transfected fibroblasts compared with substrate-coated purified L1. Furthermore, L1 decreased cholinergic-subtype differentiation and accelerated GABAergic differentiation of precursor cell-derived neurons in comparison with poly-l-lysine or laminin. Generation of dopaminergic neurons was not influenced by L1. Experiments with precursor cells generated from L1-deficient mice indicate that L1 acts via heterophilic interaction on proliferation and differentiation of L1-negative precursor cells and via a homophilic or L1 coreceptor-mediated interaction on maturation of precursor cell-derived L1-positive neurons. Clonal analysis revealed that L1 equally inhibits proliferation of monopotential, bipotential, and multipotential precursor cells, but selectively enhances neuronal differentiation of multipotential and bipotential neuron-astrocyte precursors. Our observations support a new role for L1 or L1 ligands in neural precursor cell proliferation and differentiation.