Nerve growth factor (NGF) induced differentiation in postnodal pieces (PNPs) of stage 4 chick embryos. This induction was highly selective for neural tissue; no other structures developed in the NGF-treated PNPs. Furthermore, the number of PNPs showing neural differentiation was dependent on the concentration of NGF, but there was no correlation between the concentration of NGF (5-100 ng/ml) and extent of neuralization. The neural inducing capacity of NGF could be abolished by anti-NGF antibody. NGF-induced neural differentiation was accompanied by elevated intracellular levels of cyclic AMP. Exogenous cyclic AMP (175 micrograms/ml) was able to stimulate neural differentiation but, unlike NGF, induced other structures (e.g., notochord and pulsatile tissue). Overall results suggest that cells from chick embryos at developmental stages much earlier than previously thought are responsive to NGF and NGF or a a closely related substance may serve as a neural inducer in the chick embryo.