Tissue transglutaminase is a normal constituent of the central and peripheral nervous systems and in rats transglutaminase activity in brain and spinal cord is highest during fetal stages when axonal outgrowth is occurring. Further, treatment of human neuroblastoma SH-SY5Y cells with retinoic acid results in the cells withdrawing from the cell cycle and extending neurites, in the same time frame that tissue transglutaminase expression significantly increases. Considering these and other previous findings, this study was carried out to determine whether tissue transglutaminase is involved in neuronal differentiation of SH-SY5Y cells. For these studies SH-SY5Y cells stably overexpressing wild-type tissue transglutaminase, an inactive tissue transglutaminase mutant (C277S) or an antisense tissue transglutaminase construct (which decreased endogenous tissue transglutaminase below detectable levels) were used. SH-SY5Y cells overexpressing wild-type tissue transglutaminase spontaneously differentiated into a neuronal phenotype when grown in low-serum media. In contrast, cells overexpressing inactive tissue transglutaminase or the antisense tissue transglutaminase continued to proliferate and exhibit a flat polygenic morphology even when maintained in low-serum conditions. In addition, increased tissue transglutaminase expression in response to retinoic acid was abolished in the antisense tissue transglutaminase cells, and antisense and mutant tissue transglutaminase expressing cells did not extend neurites in response to retinoic acid. Moreover, wild-type and inactive tissue transglutaminase exhibited differential intracellular localization. These data indicate that tissue transglutaminase is necessary and sufficient for neuronal differentiation of human neuroblastoma SH-SY5Y cells.