Retinoic acid (RA) induced neuronal differentiation in A126-1B2 cells and 123.7 cells, two mutant lines of PC12 that are deficient in cAMP-dependent protein kinase, but not in the parental PC12 cell line. A single exposure to RA was sufficient to cause neurite formation and inhibit cell division for a period of greater than 3 wk, suggesting that RA may cause a long-term, stable change in the state of these cells. In A126-1B2 cells, RA also induced the expression of other markers of differentiation including acetylcholinesterase and the mRNAs for neurofilament (NF-M) and GAP-43 as effectively as nerve growth factor (NGF). Neither NGF nor RA stimulated an increase in the expression of smg-25A in A126-1B2 cells, suggesting that the cAMP-dependent protein kinases may be required for an increase in the expression of this marker. RA also caused a rapid increase in the expression of the early response gene, c-fos, but did not effect the expression of egr-1. RA equivalently inhibited the division of A126-1B2 cells, 123.7 cells and parental PC12 cells, so RA induced differentiation is not an indirect response to growth arrest. In contrast, the levels of retinoic acid receptors (RAR alpha and RAR beta), and retinoic acid binding protein (CRABP) mRNA were strikingly higher in both A126-1B2 cells and 123.7 cells than in the parental PC12 cells. The deficiencies in cAMP-dependent protein kinase may increase the expression of CRABP and the RARs; and, thus, cAMP may indirectly regulate the ability of RA to control neurite formation and neural differentiation. Thus, RA appears to regulate division and differentiation of PC12 cells by a biochemical mechanism that is quite distinct from those used by peptide growth factors.