Embryonic stem (ES) cells have great potential for cell replacement in neurodegenerative disorders. Implantation of these cells into the brain, however, requires their prior differentiation. We examined the interplay between leukemia inhibitory factor (LIF) and retinoic acid (RA) on neural differentiation of mouse ES (mES) cells. Mouse embryonic stem cells were allowed to form cell aggregates, the so-called embryoid bodies (EBs), in the absence or presence of LIF. In the absence of LIF, mES cells downregulated the expression of the undifferentiated mES cell marker Oct-3/4, and increased mRNA levels of two neural precursor markers, Sox-1 and Nestin, as well as the neuronal marker β-tubulin III. This neuronal differentiation was enhanced by treating EBs with RA. Moreover, RA irreversibly increased the number of postmitotic neurons in culture, as shown by the reduction of proliferating mES cells and the increase in β-tubulin III-positive cells 6 days after RA removal, which in turn affected mES cell viability. The addition of LIF during EBs formation, however, blocked completely this neuronal differentiation. Our findings also showed that pre-differentiation of mES cells in vitro avoided the teratocarcinoma formation observed when proliferating mES cells were grafted into the brain. In addition, mES cells pre-differentiated with RA in culture showed a reduction in proliferation and the presence of neural phenotypes after grafting. In conclusion, the present results indicate that RA enhances neuronal differentiation of mES cells in the absence of LIF, although it compromises cell viability and transplantation. © 2007 Wiley-Liss, Inc.