Chronic restraint stress has been shown to induce structural remodelling throughout the interconnected dentate gyrus-CA3 fields. To find out how this stressor affects the rate of adult hippocampal neurogenesis, we subjected rats to acute or chronic restraint stress and assessed the proliferation, survival and differentiation of newly born cells in the dentate gyrus. We also examined polysialylated neural cell adhesion molecule expression, a molecule normally expressed in immature neurons and important for morphological plasticity. The results show that acute restraint stress did not change either the proliferation of dentate gyrus precursor cells or the expression of polysialylated neural cell adhesion molecule, whereas 3 weeks of chronic restraint stress suppressed proliferation by 24% and increased polysialylated neural cell adhesion molecule expression by 40%. The study was extended for an additional 3 weeks to trace the survival and development of the cells born after the initial 3 weeks of restraint. Rats subjected to 6 weeks of daily restraint stress exhibited suppressed cell proliferation and attenuated survival of the recently born cells after the extended time course, resulting in a 47% reduction of granule cell neurogenesis. Furthermore, 6 weeks of chronic stress significantly reduced the total number of granule cells by 13% and the granule cell layer volume by 5%. Expression of polysialylated neural cell adhesion molecule followed a biphasic time course, displaying a significant up-regulation after 3 weeks of daily restraint stress that was lost after 6 weeks of stress. These studies may help us understand the basis for hippocampal shrinkage and raise questions about the ultimate reversibility of the effects of chronic stress.