Activin and its cognate receptors are expressed during embryogenesis in the rapidly dividing cells of the basal forebrain ventricular zone. This finding prompted us to study the role of activin in regulating neurotransmitter phenotype expression and other aspects of the ventricular zone-derived progenitor cell differentiation. Although virtually ineffective alone, activin co-operated with fibroblast growth factor 2 to induce a rapid tyrosine hydroxylase-immunoreactivity in cultured ventricular zone progenitors. Northern analysis indicated that the increase in tyrosine hydroxylase-immunoreactivity was associated with increased tyrosine hydroxylase gene expression. Activin and fibroblast growth factor 2 action was specific to tyrosine hydroxylase, as it did not induce the expression of choline acetyltransferase, nor enhance the expression of glutamate decarboxylase. Cultures treated with the DNA replication marker bromodeoxyuridine revealed that both proliferating ventricular zone progenitors and their post-mitotic progeny were induced to express tyrosine hydroxylase. In these cultures, activin acted to reduce fibroblast growth factor 2 stimulated mitotic activity. Furthermore, activin permitted neuronal differentiation and survival of the ventricular zone progenitors after three days in vitro. Together these data demonstrate a novel role of activin and fibroblast growth factor 2 in regulating the fate of the embryonic basal forebrain ventricular zone progenitors.