We describe a cell-lineage marking system applicable to the vertebrate nervous system. The basis of the technique is gene transfer using the retroviral vector system. We used Escherichia coli beta-galactosidase as a marker gene and demonstrate a high level of expression of this marker from the viral long terminal repeat promoter, with simultaneous expression of the Tn5 neo gene from the simian virus 40 early promoter. This expression has allowed us to detect individual infected cells histochemically. We applied this marking technique to the study of lineage relationships in the developing vertebrate nervous system, both in vivo and in culture. In the rat retina, we injected virus in vivo and histochemically identified clones of marked neural cells. In addition, we used this virus to infect cultures of rat cerebral cortex and have analyzed the clonal relationships of morphologically different neural cell types. The host range of the marking system extends to avian as well as mammalian species. Thus, this system should have broad applicability as a means of gene transfer and expression in the nervous system.