Pigment Epithelium-Derived Factor (PEDF), purified from human retinal pigment epithelial (RPE) cell culture medium, is a neurotrophic factor which potentiates the differentiation of human Y-79 retinoblastoma cells and increases the survival of cerebellar granule cells. To investigate the effects of PEDF on non-transformed retinal cells, we used primary cultures of neonatal albino rat retinas, where the three principal cell types of the retinal layers (neuronal, glial and epithelial) were all present and focussed our attention on RPE cells, which are of special relevance for retinal pathophysiology. PEDF had a dramatic effect on these cells. They showed a modified phenotype, with larger dimensions, higher cytoplasmic spreading, presence of phagocytic vacuoles, development of wide intercellular contacts, and increase and maturation of pigment granules. These results suggest that PEDF may have a role in regulating RPE cell differentiation.