Thyroid hormone and retinoic acid (RA) are essential for normal neural development in vivo, yet all in vitro differentiation strategies of embryonic stem (ES) cells use only RA. We developed a novel differentiation strategy of mouse ES cells using T(3). A dominant-negative knock-in point mutation (P398H) was introduced into the thyroid hormone receptor alpha gene to determine the influence of T(3) on ES cell differentiation. Differentiation promoted by T(3) (1 nM), RA (1 microM), or combined T(3)/RA was assessed in wild-type (wt) and mutant (m) ES cells on the basis of neuronal-specific gene expression and cell cycle. T(3) alone stimulated neural differentiation in a similar fashion as that seen with RA in both wtES and mES cells. Expression of neurogranin and Ca(2+)/calmodulin-dependent kinase IV mRNA (identified in vivo as T(3)-regulated genes), however, was markedly reduced in mES, compared with wtES cells. RA treatment enhanced apoptosis, significantly greater than that seen with T(3) stimulation. T(3) treatment given with RA significantly reduced the apoptotic effects of RA, an effect not seen in mES cells. T(3)-induced ES cell neural differentiation of thyroid hormone alpha mutant and wtES cells provides an in vitro model to study T(3)-dependent gene regulation in neural development. This system could also be used to identify novel T(3)-regulated genes. The modulation of the apoptotic effects of RA by T(3) may have implications for stem cell therapy.