Neuregulin (NRG), a growth and differentiation factor that signals via erbB receptor tyrosine kinases, has been shown to have biological effects in both the CNS and the peripheral nervous system. We report here that erbB4 is expressed in mature cerebellar granule cells, where it appears to be concentrated at the granule cell postsynaptic terminals. We also show that one form of NRG, Ig-NRG, plays a crucial role in aspects of cerebellar granule cell development in vitro. First, Ig-NRG treatment of granule cells in culture selectively induces the expression of the GABA(A) receptor beta2 subunit. This increase in subunit expression is paralleled by an increase in functional GABA(A) receptors. In contrast to its effects on GABA(A) receptor subunit expression, Ig-NRG does not upregulate NMDA receptor N2B and N2C subunit expression. Second, we demonstrate that Ig-NRG also enhances neurite outgrowth from cultured granule cells. Ig-NRG does not, however, act as a survival factor for the granule cells. We have compared the effect of Ig-NRG with the effects of brain-derived neurotrophic factor (BDNF), a neurotrophin that exerts specific effects on granule cells in culture, and found that BDNF does not mimic the effects of Ig-NRG on GABA(A) receptor subunit expression. Our results show that Ig-NRG has specific effects on granule cell development and maturation and may regulate these processes in vivo.