The ternary complex factor Elk-1, a major nuclear target of extracellular signal-regulated kinases, is a strong transactivator of serum-responsive element (SRE) driven gene expression. We report here that mature brain neurons and nerve growth factor (NGF)-differentiated PC12 cells also express a second, smaller isoform of Elk-1, short Elk-1 (sElk-1). sElk-1 arises from an internal translation start site in the Elk-1 sequence, which generates a protein lacking the first 54 amino acids of the DNA-binding domain. This deletion severely compromises the ability of sElk-1 to form complexes with serum response factor on the SRE in vitro and to activate SRE reporter genes in the presence of activated Ras. Instead, sElk, but not a mutant that cannot be phosphorylated, inhibits transactivation driven by Elk-1. More pertinent to the neuronal-specific expression of sElk-1, we show it plays an opposite role to Elk-1 in potentiating NGF-driven PC12 neuronal differentiation. Overexpression of sElk-1 but not Elk-1 increases neurite extension, an effect critically linked to its phosphorylation. Interestingly, in the presence of sElk-1, Elk-1 loses its strictly nuclear localization to resemble the nuclear/cytoplasm pattern observed in the mature brain. This is blocked by mutating a normally cryptic nuclear export signal in Elk-1. These data provide new insights into molecular events underlying neuronal differentiation of PC12 cells mediated by the NGF-ERK signaling cascade.