During development, oligodendrocyte precursors undergo sequential stages of differentiation characterized by expression of distinct cell surface properties and proliferative responses. Although both PDGF and bFGF are mitogenic for these cells, the factors that regulate the progression of oligodendrocyte precursors through their differentiative program remain unclear. One factor present in the embryonic spinal cord that may regulate differentiation of oligodendrocyte precursors is retinoic acid. Here we show that retinoic acid inhibits the maturation of embryonic spinal cord oligodendrocyte precursors in vitro at an early, highly motile stage of differentiation, characterized by the expression of A2B5 immunoreactivity. Basic FGF acts both as a mitogen and an inhibitor of spinal cord oligodendrocyte precursor maturation, but at a significantly later stage of differentiation, characterized by the expression of O4 immunoreactivity. In the presence of RA both the mitogenic and differentiation inhibiting effects of bFGF are abolished, consistent with RA acting as an early regulator of oligodendrocyte differentiation. During embryonic development, oligodendrocyte precursors arise initially from a distinct group of cells at the ventral ventricular zone of the spinal cord. Myelination of the entire spinal cord is dependent on the migration of immature precursor cells to peripheral developing white matter. Since the embryonic spinal cord has the capacity to release relatively high levels of retinoids, we propose that RA inhibits oligodendrocyte differentiation during early embryonic development permitting their dispersal throughout the entire spinal cord.