Serum-free mouse embryo (SFME) cells express Glial Fibrillary Acidic Protein (GFAP), a specific marker of the astrocyte lineage, when treated with either Transforming Growth Factor Beta (TGF-beta) or calf serum. We examined the effects of the related Bone Morphogenetic Proteins (BMPs) which are expressed in the developing murine nervous system. Treatment with the heterodimers BMP-2/6 and 2/7 followed by the homodimers BMP-2, 4, 5, 6, and 7 induced higher levels of GFAP in these cells than either TGF-beta 1 or activin when tested at the same concentration. The BMP-induced cells resembled classically described astrocytes and were characterized by antibody markers as type 1 and type 2. In addition, these astrocytes also showed increased levels of the cell adhesion molecules CD44 and neural cell adhesion molecule (N-CAM), both known to be expressed by this cell type. These data clearly demonstrate that the BMPs function as differentiation factors as well as regulators of adhesion molecule expression for cells of the astrocyte lineage and suggest a key role in glial development in the nervous system.