The rat CNS neuroblastoma B50 cell line is known to differentiate on addition of 1 mM dibutyryl cyclic AMP or on withdrawal of serum. In this report it is shown that high levels of extracellular calcium (10-25 mM) cause neurite extension, an important component of morphological differentiation. Stimulation of calcium influx with the ionophore A 23187 or blockade of calcium efflux with lanthanum are less efficient than extracellular calcium in stimulating neurite extension. These data suggest that intracellular calcium is not sufficient to cause full expression of a calcium-dependent differentiated state. Furthermore, phosphatidylinositol turnover is sharply altered as early as 1 h after addition of calcium to the medium while cyclic nucleotide levels remain unaffected. This suggests that activation of the phosphatidylinositol second-messenger system by calcium at the level of the cell membrane is the initial step in the cascade of events leading to neurite extension. Later events include a decrease in DNA synthesis (6-10 h after addition of calcium), and increase in intracellular calcium levels (12-24 h after calcium addition) concurrent with neurite extension. The intracellular increase in calcium levels is facilitated by synergistic action of 1 mM dibutyryl cyclic AMP with high external calcium (10-25 mM). This combined treatment results in a more complex pattern of neurite formation characterized by many synaptic-like junctions; this pattern is not obtained when either dibutyryl cyclic AMP or calcium is used as sole inducer.