The Drosophila gene pointed (pnt) encodes two putative transcription factors (P1 and P2) of the Ets family, which in the embryonic CNS are found exclusively in glial cells. Loss of pnt function leads to poorly differentiated glial cells and a marked decrease in the expression of the neuronal antigen 22C10 in the MP2 neurons, which are known to interact intimately with the pntP1-expressing longitudinal glial cells. Ectopic expression of pntP1 RNA forces additional CNS cells to enter the glial differentiation pathway. Interestingly, the additional glial-like cells are often flanked by cells that ectopically express the neuronal antigen 22C10. Therefore, both the pnt loss-of-function as well as the gain-of-function phenotype suggest that glial cells are able to induce 22C10 expression on neighboring neurons. This was further verified by cell transplantation experiments. Thus, pnt is not only required but also sufficient for several aspects of glial differentiation.