Evidence from retroviral marking techniques and immortalized cell lines indicates that multipotential stem cells exist in many areas of the developing central nervous system. However, the factors that influence the commitment of these stem cells into distinct neuronal or glial lineages are not known. We have created an immortalized hypothalamic cell line derived from embryonic day 14 hypothalamic cells with a replication-defective retroviral construct containing a temperature-sensitive allele (tsA58) of the large T antigen of the simian virus 40. The clonality of this cell line, which we have named V1, was established by single cell cloning and by Southern blot analysis. V1 cells exhibit two different morphologies: the vast majority of cells are flat and stellate, and a smaller number are phase-bright round cells with processes. V1 cells express nestin and neural-cell adhesion molecule, typical of proliferating neuroepithelial cells. They also express glial fibrillary acidic protein and S100 as well as the low molecular weight neurofilament protein. In addition, the phase-bright, process-bearing V1 cells stain intensely for many typical neuronal proteins, such as low, medium and high molecular weight neurofilament proteins, tau protein, microtubule-associated protein-2, and neuron-specific enolase. The phase-bright cells also have condensed chromatin and display mitotic spindles, indicating that they are in mitosis. When V1 cells are transferred from the permissive temperature (33 degrees C) to the restrictive temperature (39 degrees C), there is a decrease in expression of NF-L and an increase in expression of NF-H and glial fibrillary acidic protein in the flat V1 cells. The enhanced expression of neuronal antigens in mitotically active V1 cells is novel and may represent a more general property of the differentiation process. We suggest that V1 cells arise from a mixed neural/glial neuroepithelial progenitor cell that expresses both neuronal- and glial-specific proteins in the developing hypothalamus.