Growth factors and cytokines are thought to influence the development of uncommitted progenitor cell populations, but the issue of how these factors act on individual cells remains controversial. Such factors may act simply as selective mitogens or survival factors for cells that undergo lineage restrictions stochastically. Alternatively, they may instruct or bias multipotent cells to choose one lineage at the expense of others. Here we show that glial growth factor (GGF), previously defined as a Schwann cell mitogen, strongly suppresses neuronal differentiation of rat neural crest stem cells while promoting or allowing glial differentiation. Quantitative clonal analysis suggests that the action of GGF is likely to be instructive rather than selective. Taken together with the expression pattern of GGF, these data suggest a lateral signaling model for the diversification of cell types within developing peripheral ganglia.