Perturbation of the function of the retinoblastoma (Rb) protein is found in most human tumors. Id2 is a natural target of the Rb protein that is recruited by Myc oncoproteins to bypass the tumor suppressor function of Rb. Here we report that an "N-Myc-Id2 pathway" persists during late development of the nervous system and parallels the rising levels of active Rb in neuronal precursors withdrawing from the cell cycle. An immunohistochemical analysis of primary neuroblastoma from 47 patients shows that expression of Id2 is strongly predictive of poor outcome, irrespective of other clinical and biological variables. Overexpression of Id2 mediates cellular transformation and is required to maintain the malignant behavior of neuroblastoma cells. Correspondingly, embryonic fibroblasts from Id2-null mice display impaired ability to proliferate. We suggest that Id2 overexpression may be a better prognostic indicator than N-myc gene amplification in neuroblastoma. Thus, disrupting Id2 function may lead to new and useful therapeutic strategies for cancer patients.