In order to develop a model system for investigating the role of ras genes in neuronal differentiation, a construct consisting of a mouse N-ras oncogene linked to a dexamethasone-inducible promoter was devised and transfected into a subline of the PC12 rat pheochromocytoma cell line. Clonal lines were isolated which extended neurite-like processes within one day of exposure to dexamethasone. N-ras had a strong antiproliferative effect on these cells. These effects were reversible after removing dexamethasone. Elevation of mRNA for ornithine decarboxylase (ODC) was detected 6-18 hours after induction of N-ras by dexamethasone. The effects of ras on cell division, differentiation and cell size were analogous, but not identical to the effects of NGF on PC12 cells. One NGF action, induction of c-fos mRNA did not occur in ras-induced cells indicating that c-fos induction is unnecessary for both neurite outgrowth and for subsequent induction of ODC mRNA. The ability of ras to induce ODC, a division promoting enzyme, may also be relevant to the transforming actions of ras oncogenes.