In the present study we have investigated retinal pigment epithelium-photoreceptor cell interactions in vitro, and their contributions to photoreceptor cell survival and differentiation. Preparations enriched for intact photoreceptor cells from neonatal rat retina were grown in either serum-free medium supplemented with RPE-conditioned medium (RPE-CM) or in serum-free medium alone. A variety of substrate conditions were tested for the best neurite outgrowth. Cultures were monitored for 7 days by light and electron microscopy, as well as by opsin, vimentin and carbonic anhydrase-C immunocytochemistry. RPE-CM was found to stimulate both proliferation of flat cells and photoreceptor differentiation. The number of photoreceptors bearing neurites and their neurite length measurements showed significant differences between the RPE-CM group and the control group within 20 hr in culture. Elimination of contaminating flat cells by the addition of an antimitotic drug prevented photoreceptor cell morphological maturation; however, these cells survived as round cell bodies without processes for at least 10 days in the presence of RPE-CM and expressed opsin during this period. Conditioned medium from the flat-cell monolayers did not support photoreceptor differentiation or their survival. However, the presence of flat cells was a requisite to achieve any neurite outgrowth even in the presence of RPE-CM. In the absence of RPE-CM, neither photoreceptors nor flat cells survived or proliferated. Heat and trypsin treatment of the RPE-CM abolished all its growth-supporting activities which indicates its proteinaceous nature. This represents the first time in vitro that an RPE-derived factor(s) has been shown to be responsible for photoreceptor cell survival and differentiation.