Neurons engage in two distinct types of cell-cell interactions: they receive innervation and establish synapses on target tissues. Regulatory events that influence synapse formation and function on developing neurons are largely undefined. We show here that nicotinic acetylcholine receptor (AChR) subunit transcript levels are differentially regulated by innervation and target tissue interactions in developing chick ciliary ganglion neurons in situ. Using ganglia that have developed in the absence of pre- or postganglionic tissues and quantitative RT-PCR, we demonstrate that alpha 3 and beta 4 transcript levels are increased by innervation and target tissue interactions. In contrast, alpha 5 transcript levels are increased by innervation, but target tissues have little effect. Whole-cell ACh-induced currents, used to estimate the number of functional AChRs, change in correlation with alpha 3 and beta 4, but not alpha 5, transcript levels. A model is proposed in which the changes in AChR subunit expression regulate levels of synaptic activity, which is a critical determinant of synapse stabilization and elimination, and neuronal cell death.