The relationship between terminal cell differentiation and changes in the subcellular levels of the HER-2/neu antigen was investigated in cultured human breast cancer cells: AU-565 cells (which overexpress the HER-2/neu gene) and MCF-7 cells (which do not overexpress this gene). Differentiation was achieved by treating the cells with mycophenolic acid (MPA), phorbol 12-myristate 13-acetate (PMA), retinoic acid (RA), or the TA-1 monoclonal antibody to the extracellular domain of the HER-2/neu protein. Ten to twenty percent of the cells in untreated, sparsely growing AU-565 cultures exhibited morphological maturation characterized by large lacy nuclei surrounded by sizable flat cytoplasms. A fraction of these cells harbored milk factors such as casein and large lipid droplets. Treatment of the AU-565 cells for 4 d with 9 microM MPA, 1.6 nM PMA, 2.5 microM RA, or 1 microgram/mL TA-1 antibody resulted in cell growth inhibition and an increase in the percentage of cells (48-97%) that exhibit a mature phenotype. MCF-7 cells were also susceptible to differentiation by MPA and RA, but to a lesser degree than the AU-565 cells. Differentiation in the AU-565 and MCF-7 cells was associated with reduced immunostaining for the HER-2/neu protein at the cell surface membrane and with a transient increased diffuse immunostaining for this protein in the cytoplasm.