The PC12 pheochromocytoma cell line responds to NGF by undergoing growth arrest and proceeding to differentiate toward a neuronal phenotype. Among the early genetic events triggered by NGF in PC12 cells are the rapid activation of the zinc finger transcription factor Egr1/NGFI-A, and a slightly delayed induction of NAB2, a corepressor that inhibits Egr1 transcriptional activity. We found that stably transfected PC12 cells expressing high levels of NAB2 do not differentiate, but rather continue to proliferate in response to NGF. Inhibition of PC12 differentiation by NAB2 overexpression was confirmed using two additional experimental approaches, transient transfection, and adenoviral infection. Early events in the NGF signaling cascade, such as activation of MAP kinase and induction of immediate-early genes, were unaltered in the NAB2-overexpressing PC12 cell lines. However, induction of delayed NGF response genes such as TGF-beta1 and MMP-3 was inhibited. Furthermore, NAB2 overexpression led to downregulation of p21(WAF1), a molecule previously shown to play a pivotal role in the ability of PC12 cells to undergo growth arrest and commit to differentiation in response to NGF. Cotransfection with p21(WAF1) restored the ability of NAB2-overexpressing PC12 cells to differentiate in response to NGF.