Neuronal expression of apolipoprotein (apo) E4 may contribute to the pathogenesis of Alzheimer's disease (AD). In studying how apoE expression is regulated in neurons, we identified a splicing variant of apoE mRNA with intron-3 retention (apoE-I3). ApoE-I3 mRNA was detected in neuronal cell lines and primary neurons, but not in astrocytic cell lines or primary astrocytes, from humans and mice by reverse transcription (RT)-PCR. In both wild-type and human apoE knock-in mice, apoE-I3 was found predominantly in cortical and hippocampal neurons by in situ hybridization. Cell fractionation and quantitative RT-PCR revealed that over 98% of the apoE-I3 mRNA was retained in the nucleus without protein translation. In transfected primary neurons, apoE expression increased dramatically when intron-3 was deleted from a genomic DNA construct and decreased markedly when intron-3 was inserted into a cDNA construct, suggesting that intron-3 retention/splicing controls apoE expression in neurons. In response to excitotoxic challenge, the apoE-I3 mRNA was markedly increased in morphologically normal hippocampal neurons but reduced in degenerating hippocampal neurons in mice; apoE mRNA showed the opposite pattern. This apparent precursor-product relationship between apoE-I3 and apoE mRNA was supported by a transcriptional inhibition study. Thus, neuronal expression of apoE is controlled by transcription of apoE-I3 under normal conditions and by processing of apoE-I3 into mature apoE mRNA in response to injury.