Neural induction of ectoderm cells has been reconstituted and examined in a microculture system derived from dissociated early gastrula cells of Xenopus laevis. We have used monoclonal antibodies as specific markers to monitor cellular differentiation from three distinct ectoderm lineages in culture (N1 for CNS neurons from neural tube, Me1 for melanophores from neural crest and E3 for skin epidermal cells from epidermal lineages). CNS neurons and melanophores differentiate when deep layer

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... of the ventral ectoderm (VE, prospective epidermis region; 150 cells/culture) and an appropriate region of the marginal zone (MZ, prospective mesoderm region; 5-150 cells/culture) are co-cultured, but not in cultures of either cell type on their own; VE cells cultured alone yield epidermal cells as we have previously reported. The extent of inductive neural differentiation in the co-culture system strongly depends on the origin and number of MZ cells initially added to culture wells. The potency to induce CNS neurons is highest for dorsal MZ cells and sharply decreases as more ventrally located cells are used. The same dorsoventral distribution of potency is seen in the ability of MZ cells to inhibit epidermal differentiation. In contrast, the ability of MZ cells to induce melanophores shows the reverse polarity, ventral to dorsal. These data indicate that separate developmental mechanisms are used for the induction of neural tube and neural crest lineages. Co-differentiation of CNS neurons or melanophores with epidermal cells can be obtained in a single well of co-cultures of VE cells (150) and a wide range of numbers of MZ cells (5 to 100). Further, reproducible differentiation of both neural lineages requires intimate association between cells from the two gastrula regions; virtually no differentiation is obtained when cells from the VE and MZ are separated in a culture well. These results indicate that the inducing signals from MZ cells for both neural tube and neural crest lineages affect only nearby ectoderm cells.