Recent studies suggest that heterotypic cell-cell interactions influence gliogenesis in the developing rat central nervous system. CNS neuron-derived factors have been hypothesized to exist, and several have been identified and partially characterized which affect the number of oligodendrocytes in vitro. In order to study further the role of neurons in gliogenesis, we have used serum-free culture conditions, the B104 CNS neuronal cell line as a source of soluble factors, and dissociated neonatal rat brain cells as a source of glial cells. We have analyzed the response of the glial cells to serum-free B104 conditioned medium using morphological, immunocytochemical, autoradiographic, and enzymatic methods. Dose-dependent increases in the number of morphologically identified oligodendrocytes occur in response to this conditioned medium. Galactocerebroside (GalC) is a specific marker for oligodendrocytes, and the A2B5 antigen marks bipotential glial progenitor cells and their progeny: immature oligodendrocytes and type 2 astrocytes. In the presence of conditioned medium, the number of cells expressing GalC and/or A2B5 antigen increases over time when measured at 4, 8, and 12 days in vitro. A significantly weaker effect is seen if serum is also present. Since the vast majority of A2B5-positive cells in conditioned medium treated cultures lack glial fibrillary acidic protein (GFA), indicative of type 2 astrocytes, they represent glial progenitors and immature oligodendrocytes. Double immunostaining combined with autoradiography suggests that the latter cell types are the target cells for the oligodendrocyte-promoting activity. In addition, the conditioned medium markedly increases 2',3' cyclic nucleotide 3'-phosphodiesterase (an oligodendrocyte marker) and to a lesser extent enhances glutamine synthetase activity (an astrocyte marker). Type 1 astrocytes are also more morphologically differentiated in this condition, and their percentage is decreased simultaneously. Conditioned medium from other donor neural cells either has no activity or is much less effective than B104 conditioned medium. The active factors are soluble, sensitive to both trypsin and 100 degrees C treatment for 20 min, and appear to be 30-100 kilodaltons by stirred cell ultrafiltration. In summary, we have identified a potent source of growth-stimulating factors that produce increased numbers of glial progenitor cells and oligodendrocytes; the same conditioned medium also appears to inhibit type 1 astrocyte proliferation.