The timing of cell differentiation can be controlled both by cellintrinsic mechanisms and by cell-extrinsic signals. Oligodendrocyte type-2 astrocyte progenitor cells are known to be the precursor cells that give rise to oligodendrocytes. When stimulated to divide by purified cortical astrocytes or by platelet-derived growth factor, these progenitor cells generate oligodendrocytes in vitro with a timing like that observed in vivo. The most widely accepted model of this process assumes a cell-intrinsic biological clock that resides in the progenitor cell. The intrinsic clock model originally proposed in 1986 remains as the dominant theoretical concept for the analysis of timed differentiation in this cell lineage. However, the results of a recent experimental study (Ibarrola et al., Developmental Biology, vol. 180, 1-21, 1996) are most consistent with the hypothesis that the propensity of a clone of dividing O-2A progenitor cells initially to generate at least one oligodendrocyte may be regulated by cell-intrinsic mechanisms, but that environmental signals regulate the extent of further oligodendrocyte generation. We propose a stochastic model of cell differentiation in culture to accommodate the most recent experimental findings. Our model is an age-dependent branching stochastic process with two types of cells. The model makes it possible to derive analytical expressions for the expected number of progenitor cells and of oligodendrocytes as functions of time. The model parameters were estimated by fitting these functions through data on the average (sample mean) number of both types of cells per colony at different time intervals from start of experiment. Using this method we provide a biologically meaningful interpretation of the observed pattern of oligodendrocyte generation in vitro and its modification in the presence of thyroid hormone.