Mouse embryonic stem cells were induced to differentiate in culture with retinoic acid. Putative precursors of neurons and glial cells (nestin-positive cells) were clearly identified as early as three days after the onset of differentiation. At day 6, neuron-like cells could be clearly identified, either as isolated cells or as cellular networks. Some of these cells were positive for astrocyte- or oligodendrocyte-specific antigens (GFAP or O4 antigens, respectively). Other cells were positive for neuron-specific antigens (cytoskeleton proteins MAP2, MAP5 and NF200, as well as synaptophysin). Some neuronal-like cells were also positive for acetylcholinesterase activity or glutamic acid decarboxylase expression, indicating that ES cells could differentiate into GABAergic and possibly cholinergic neurons. Electrophysiological analyses performed in voltage clamp conditions showed that cell membranes contained voltage-dependent channels. Overshooting action potentials could be triggered by current injection. Taken together, these data provide evidence that embryonic stem cells can differentiate first into neuron-glia progenitors, and later into glial cells and functional neurons, in vitro. This technique provides an unique system to study early steps of neuronal differentiation in vitro.