We investigated the effect of the retinal pigmented epithelium on cell proliferation and differentiation in rosetted retinospheroids, which are retina-like spheres reaggregated in the complete absence of retinal pigmented epithelium from dissociated retinal cells of 6-day-old chick embryos in a rotation culture system. In spheroids raised in the absence of retinal pigmented epithelium (controls), acetylcholinesterase was expressed in cells of an inner nuclear-like layer and their neuropil matrices. Moreover, the ratio between rods and cones was found to be approximately normal throughout the spheroid. When spheroids were cultured in the presence of retinal pigmented epithelium monolayers, cell proliferation in spheroids as determined by BrdU labelling was significantly increased and extended for 1 week, while acetylcholinesterase protein levels and specific activities in homogenates were decreased to approximately 30%. At the same time, opsin immunoreactivity was completely suppressed within the spheroid and appeared slowly in cells around its periphery; i.e. the proportion of rhodopsin-positive cells decreased from 14 to 3%. This study reveals that the retinal pigmented epithelium in vitro sustains cell proliferation but inhibits the differentiation of acetylcholinesterase-positive cells and of photoreceptors.