Unlike in the adult brain, the newborn brain specifically takes up serum albumin during the postnatal period, coinciding with the stage of maximal brain development. Here we report that albumin stimulates oleic acid synthesis by astrocytes from the main metabolic substrates available during brain development. Oleic acid released by astrocytes is used by neurons for the synthesis of phospholipids and is specifically incorporated into growth cones. Oleic acid promotes axonal growth, neuronal clustering, and expression of the axonal growth-associated protein-43, GAP-43; all these observations indicating neuronal differentiation. The effect of oleic acid on GAP-43 synthesis is brought about by the activation of protein kinase C, since it was prevented by inhibitors of this kinase, such as H-7, polymyxin or sphingosine. The expression of GAP-43 was significantly increased in neurons co-cultured with astrocytes by the presence of albumin indicating that neuronal differentiation takes place in the presence of oleic acid synthesized and released by astrocytes in situ. In conclusion, during brain development the presence of albumin could play an important role by triggering the synthesis and release of oleic acid by astrocytes, which induces neuronal differentiation.