Differentiation of the human embryonal carcinoma cell line NTERA-2 is characterized by changes in morphology, altered patterns of gene expression, reduced proliferative potential, and a loss of tumorigenicity. The cellular repressor of E1A-stimulated genes, CREG, was previously shown to antagonize transcriptional activation and cellular transformation by the Adenovirus E1A oncoprotein. These properties suggested that CREG may function to inhibit cell growth and/or promote differentiation. Here we show that CREG is a secreted glycoprotein which enhances differentiation of NTERA-2 cells. Northern blot analysis reveals that, although CREG mRNA is widely expressed in adult tissues, CREG mRNA is not significantly expressed in pluripotent mouse embryonic stem cells or NTERA-2 embryonal carcinoma cells. CREG mRNA is rapidly induced upon in vitro differentiation of both mouse embryonic stem cells and human NTERA-2 cells. We show that constitutive expression of CREG in NTERA-2 cells enhances neuronal differentiation upon treatment with retinoic acid. Media enriched in CREG was also found to promote NTERA-2 differentiation in the absence of an inducer such as retinoic acid. These studies suggest that secreted CREG protein participates in a signaling cascade important for differentiation of pluripotent stem cells such as those found in teratocarcinomas.