The differentiation potential of early mammalian myogenic cells was tested under clonal culture conditions. Cells were isolated from paraxial mesoderm and limb buds of transgenic mouse embryos at 9.5 days after conception and grown in culture at clonal density either on collagencoated dishes or on various feeder cell layers. The transgene used contained a reporter gene encoding j3-galactosidase with a nuclear localization signal under the control of regulatory sequences from the gene for fast myosin light chain 3, so that 13-galactosidase staining indicated the presence of differentiated muscle cells. After 5 days in culture, the number and size of 13-galactosidase-positive (.8-gal+) clones were recorded.Cells isolated from somites I-V (the last five somites to have formed) or from unsegmented paraxial mesoderm did not give rise to any j8-gal+ clones. Cells isolated from somites VI-X or from the forelimb bud gave rise to .8-gal+ clones, but only on feeder cells. Cells from somites XI or older gave rise to f8-gal+ clones independently of the substrate. However, when cells isolated from unsegmented paraxial mesoderm or somites I-V were cultured with nontransgenic cells from the trunk (including neural tube and notochord), differentiation occurred on condition that the cells were in a three-dimensional aggregate, even though their specific position in the somite had been lost. By culturing explants ranging in size from 1 to < 100 cells in the presence of an inhibitor of cell division, we determined that a minimal number of 30-40 cells is required for mesodermal cells to differentiate.The mechanisms by which mesoderm is induced and muscle differentiation is initiated are still poorly understood. Work mainly carried out with Xenopus embryos has implicated members of the fibroblast growth factor and transforming growth factor f families as inductive molecules released by the endoderm and capable of inducing mesodermal gene expression in competent ectodermal cells (1).Furthermore, in order to respond to inductive signals, competent cells must be surrounded by similar cells (2). This phenomenon, the "community effect," has been described in the amphibian embryo as a prerequisite for mesodermal cells to undergo differentiation into skeletal muscle (3) and into other mesodermal derivatives such as notochord (4). During gastrulation, single cells isolated from areas fated to give rise to muscle and transplanted to a different environment will fail to differentiate into muscle, whereas groups of cells similarly transplanted will do so. At the end of gastrulation mesodermal cells no longer require such a community effect and will terminally differentiate independently of their location and the type of neighboring cell. At this point the cells are assumed to be irreversibly committed to differentiation.In the case of higher vertebrates, virtually nothing is known about the induction of mesoderm. Several studies, however, have suggested a role for axial structures (i.e., notochord and neural tube) in inducing myogenesi...