In the developing mammalian central nervous system, neural precursor cells show a tightly regulated inverse relationship between cell proliferation and differentiation. The molecular mechanisms which control the inter-relationship between these two events are poorly understood. To approach this problem, we previously identified several novel genes which are most prominently expressed in the early embryonic brain. Further cloning and sequencing of one such gene, Nedd1, revealed that it can encode a protein with a M(r) of 71,000, the amino-terminal half of which shares significant structural similarity with the beta-subunit of heterotrimeric GTP-binding proteins. Nedd1 mRNA is strongly expressed in early embryonic brain, but it can be detected at low levels in a number of adult tissues as well as cell lines and is up-regulated in an embryonal carcinoma cell line upon retinoic acid-induced differentiation. Ectopic expression of Nedd1 gene by means of eukaryotic vectors in various cell lines resulted in varying degrees of growth suppression. The strongest effects were evident in differentiation-competent neuroblastoma-derived cell lines. Our results suggest that the Nedd1 gene may play a role in the differentiation-coupled growth arrest in neuronal cells.