The isolation of the Drosophila insulin receptor gene and the recent analysis of loss of function mutants have clearly implicated insulin signalling in embryonic nervous system development. Here we study the presence of insulin in the embryo and we characterize the cellular processes affected by insulin in embryonic neural cells. We find that 7.5% of the cells in the 15-18 h Drosophila embryo contain insulin immunoreactivity by flow cytometry. In the embryonic-derived cell line Schneider 1, we show that human insulin is capable of stimulating proliferation and neural differentiation. Thus, the action of insulin on the developing Drosophila nervous system appears to be as pleiotropic as in vertebrates.