Culture of embryonic stem (ES) cells at high density inhibits both beta-catenin signaling and neural differentiation. ES cell density does not influence beta-catenin expression, but a greater proportion of beta-catenin is targeted for degradation in high-density cultures. Moreover, in high-density cultures, beta-catenin is preferentially localized to the membrane further reducing beta-catenin signaling. Increasing beta-catenin signaling by treatment with Wnt3a-conditioned medium, by overexpression of beta-catenin, or by overexpression of a dominant-negative form of E-cadherin promotes neurogenesis. Furthermore, beta-catenin signaling is sufficient to induce neurogenesis in high-density cultures even in the absence of retinoic acid (RA), although RA potentiates the effects of beta-catenin. By contrast, RA does not induce neurogenesis in high-density cultures in the absence of beta-catenin signaling. Truncation of the armadillo domain of beta-catenin, but not the C terminus or the N terminus, eliminates its proneural effects. The proneural effects of beta-catenin reflect enhanced lineage commitment rather than proliferation of neural progenitor cells. Neurons induced by beta-catenin overexpression either alone or in association with RA express the caudal neuronal marker Hoxc4. However, RA treatment inhibits the beta-catenin-mediated generation of tyrosine hydroxylase-positive neurons, suggesting that not all of the effects of RA are dependent upon beta-catenin signaling. These observations suggest that beta-catenin signaling promotes neural lineage commitment by ES cells, and that beta-catenin signaling may be a necessary co-factor for RA-mediated neuronal differentiation. Further, enhancement of beta-catenin signaling with RA treatment significantly increases the numbers of neurons generated from ES cells, thus suggesting a method for obtaining large numbers of neural species for possible use in for ES cell transplantation.