Stem cell technology promises new and rapid advances in cell therapy and dr
ug discovery. Clearly, the value of this approach will be limited by the di
fferentiated functions displayed by the progeny of stem cells. The foetal a
nd adult central nervous system (CNS) harbour stem cells that can be expand
ed in vitro and differentiate into immature neurons and glia. Surprisingly,
we do not know if neurons derived from stem cells form synapses, a definit
ive feature of neuronal function. Neuronal differentiation is a complex pro
cess and in this paper we establish conditions that permit extensive matura
tion of neurons in the presence of neurotrophins. These conditions permit t
he differentiation of rat hippocampal stem cells into both excitatory (glut
amatergic) and inhibitory (GABAergic) neurons. The proportion of excitatory
and inhibitory synapses was strongly influenced by specific neurotrophins,
and these responses reflect the region of origin of the stem cells in the
brain. These data show that stem cells can be used to study mechanisms of e
xcitation and inhibition in the nervous system.