It has been reported that interferon-gamma (IFN-gamma) facilitates differentiation of PC-12 cells and murine adult neural stem cells. Here we show that IFN-gamma promotes the differentiation of C17.2 neural progenitor cells (NPC) into a neuronal phenotype characterized by neurite outgrowth and the expression of the neuronal marker protein beta-III tubulin. IFN-gamma induced an increase in the activity c-jun N-terminal kinase (JNK) without affecting activities of extracellular signal-regulated kinases (ERKs 1 and 2). An inhibitor of JNK blocked the ability of IFN-gamma to promote differentiation of NPC into neurons, whereas an inhibitor of ERKs 1 and 2 did not. Our findings show that the pro-inflammatory cytokine, IFN-gamma has the potential to stimulate neurogenesis, suggesting roles for this cytokine in development and repair of the nervous system.