In the absence of retinoic acid, PSA-G teratocarcinoma stem cells spontaneously differentiate at a moderate frequency into fibroblast-like cells. In the presence of retinoic acid and dibutyryl cyclic AMP, PSA-G stem cells differentiate into parietal endoderm cells. We prepared a cDNA library from undifferentiated PSA-G teratocarcinoma stem cells; this cDNA library was then screened for gene sequences which exhibit a reduction in expression during the differentiation of these stem cells. From ca. 1,000 clones screened, eight independent sequences were isolated. The level of expression of these cloned genes decreases by 3.0-fold to more than 10-fold after differentiation of PSA-G cells into fibroblast-like cells. After treatment of either PSA-G or F9 teratocarcinoma cells with retinoic acid and dibutyryl cyclic AMP for 72 h, the expression of seven genes is inhibited by two- to fourfold. This decrease of clone-specific transcripts can be detected within 12 h after the addition of retinoic acid. Hybridization-selection and in vitro translation experiments identified the proteins encoded by three of the cloned genes: pST 6-23 codes for a 89,000-dalton protein, pST 7-105 codes for a 41,000-dalton protein, and pST 9-31 codes for a 34,000-dalton protein. The 89,000-dalton protein encoded by pST 6-23 is a heat shock protein. In vitro transcription experiments demonstrate that the retinoic acid-mediated decrease in pST 6-135- and pST 1-68-specific RNA occurs at the transcriptional level and that dibutyryl cyclic AMP acts posttranscriptionally to further depress the levels of these RNAs.