O-2A progenitor cells are bipotential glial precursors that give rise to both oligodendrocytes and type-2 astrocytes on a precise schedule in the rat CNS. Studies in culture suggest that oligodendrocyte differentiation occurs constitutively, while type-2 astrocyte differentiation requires an exogenous inducer such as fetal calf serum. Here we describe a rat brain cell culture system in which type-2 astrocytes develop on schedule in the absence of exogenous inducers. Coincident with type-2-astrocyte development, the cultures produce an approximately 20 kd type-2-astrocyte-inducing factor(s). Purified cultures of type-1 astrocytes can produce a similar factor(s). Under conditions where they produce type-2-astrocyte-inducing factor(s), both brain and type-1 astrocyte cultures produce a factor(s) with ciliary neurotrophic (CNTF)-like activity. Purified CNTF, like the inducers from brain and type-1 astrocyte cultures, prematurely induces type-2 astrocyte differentiation in brain cultures. These findings suggest that type-2 astrocyte development is initiated by a CNTF-like protein produced by type-1 astrocytes.