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The controlled differentiation of mouse embryonic stem (ES) cells into near homogeneous populations of both neurons and skeletal muscle cells that can survive and function in vivo after transplantation is reported. We show that treatment of pluripotent ES cells with retinoic acid (RA) and dimethylsulfoxide (DMSO) induce differentiation of these cells into highly enriched populations of gamma-aminobutyric acid (GABA) expressing neurons and skeletal myoblasts, respectively. For neuronal differentiation, RA alone is sufficient to induce ES cells to differentiate into neuronal cells that show properties of postmitotic neurons both in vitro and in vivo. In vivo function of RA-induced neuronal cells was demonstrated by transplantation into the quinolinic acid lesioned striatum of rats (a rat model for Huntington's disease), where cells integrated and survived for up to 6 wk. The response of embryonic stem cells to DMSO to form muscle was less dramatic than that observed for RA. DMSO-induced ES cells formed mixed populations of muscle cells composed of cardiac, smooth, and skeletal muscle instead of homogeneous populations of a single muscle cell type. To determine whether the response of ES cells to DMSO induction could be further controlled, ES cells were stably transfected with a gene coding for the muscle-specific regulatory factor, MyoD. When induced with DMSO, ES cells constitutively expressing high levels of MyoD differentiated exclusively into skeletal myoblasts (no cardiac or smooth muscle cells) that fused to form myotubes capable of spontaneous contraction. Thus, the specific muscle cell type formed was controlled by the expression of MyoD. These results provided evidence that the specific cell type formed (whether it be muscle, neuronal, or other cell types) can be controlled in vitro. Further, these results demonstrated that ES cells can provide a source of multiple differentiated cell types that can be used for transplantation.