The neural crest of early vertebrate embryos gives rise to a wide variety of cell types. One way in which phenotypic diversity may be generated in neural-crest-derived cells is by a series of partial developmental restrictions. In order to test the possibility that the crest-derived mesenchymal cells of the branchial arches (BAs) of avian embryos are partially restricted intermediates during this segregation of developmental fates, we examined some of their phenotypic and developmental properties. We found that the mesenchymal cells of the posterior BAs differ from those of the anterior BAs in that the posterior BA cells express the neuron-specific antigen NAPA-73, whereas the anterior BA cells do not. This phenotypic difference first appears in the different populations of migrating neural crest cells which populate the different BAs. Anterior and posterior BA cells also differ in their abilities to give rise to various crest derivatives in heterospecific grafting experiments. Whereas anterior BA cells only produce connective tissue derivatives, posterior BA cells give rise to neurons, glial cells, and glandular tissue, in addition to the connective tissues. However, neither anterior nor posterior BA grafts give rise to melanocytes--another neural crest derivative. This developmental restriction of melanogenic potential occurs either during crest migration, or shortly after colonization of the BAs. These results are consistent with the notion that the mesenchyme of both anterior and posterior BAs contain different partially restricted intermediate cell types derived from the neural crest.