The PACAP ligand/type I receptor system is expressed throughout the embryonic nervous system, suggesting roles in regulating neural patterning and neurogenesis. In the forebrain, precursors of the six-layered cerebral cortex cease dividing in a highly reproducible spatiotemporal sequence. The time of cell cycle exit in fact determines neuron laminar fate. Our studies indicate that PACAP signaling may elicit cortical precursor withdrawal from the cell cycle, antagonizing mitogenic stimulators. PACAP inhibited embryonic day 13.5 rat cortical precursor [3H]thymidine incorporation, decreasing the proportion of mitotic cells. PACAP promoted morphological and biochemical differentiation, indicating that PACAP-induced cell cycle withdrawal was accompanied by neuronal differentiation. In vivo, embryonic cortex contains PACAP. In culture, 85% of cells expressed PACAP while 64% exhibited receptor. Co-localization studies indicated that PACAP ligand and receptor were expressed by the mitotic precursors that divided in response to bFGF, suggesting that precursors integrate mitogenic and anti-mitogenic signals to determine the timing of cell cycle exit. The expression of PACAP ligand and receptor in precursors raised the possibility of autocrine function. Indeed, peptide antagonists increased proliferation, suggesting that the PACAP system is expressed to elicit cell cycle exit. During ontogeny, an inhibitory signal, such as PACAP, may be required to counter the stimulatory activity of mitogenic bFGF and IGFI whose expression during cortical neurogenesis is sustained. The dynamic interplay of positive and negative regulators would regulate the timing of cell cycle withdrawal, and thus neuronal phenotype and laminar position.