Aggregation of P19 embryonal carcinoma cells in the presence of a factor, secreted by the visceral endoderm-like cell line END-2, induces differentiation to cell types including visceral endoderm, mesoderm-derived muscle tissue and neurons. This factor is different from activin A, type beta transforming growth factors (TGF beta) and fibroblast growth factors (FGF) although its acid- and heat-lability and its stability in the presence of reducing agents resemble the properties of the FGFs. The END-2 factor is completely inhibited in its action by activin A. This inhibitory effect of activin A is not specific for the END-2 factor as retinoic acid (RA)-induced differentiation of aggregated P19 EC cells into neurons (10(-8) M RA) or mesoderm-derived muscle tissue (10(-9) M RA) is also completely inhibited by activin A. The results of this study suggest that the END-2 activity and activin A are intimately involved in the induction and regulation, respectively, of early differentiation processes in vertebrate embryogenesis.