Retinoic acid modulates a wide variety of biological processes including proliferation, differentiation, and apoptosis. It interacts with specific receptors in the nucleus, the retinoic acid receptors (RARs). The molecular mechanism by which retinoic acid mediates cellular differentiation and growth suppression in neural cells remains unknown. However, retinoic acid-induced release of arachidonic acid and its metabolites may play an important role in cell proliferation, differentiation, and apoptosis. In brain tissue, arachidonic acid is mainly released by the action of phospholipase A2 (PLA2) and phospholipase C (PLC)/diacylglycerol lipase pathways. We have used the model of differentiation in LA-N-1 cells induced by retinoic acid. The treatment of LA-N-1 cells with retinoic acid produces an increase in phospholipase A2 activity in the nuclear fraction. The pan retinoic acid receptor antagonist, BMS493, can prevent this increase in phospholipase A2 activity. This suggests that retinoic acid-induced stimulation of phospholipase A2 activity is a retinoic acid receptor-mediated process. LA-N-1 cell nuclei also have phospholipase C and phospholipase D (PLD) activities that are stimulated by retinoic acid. Selective phospholipase C and phospholipase D inhibitors block the stimulation of phospholipase C and phospholipase D activities. Thus, both direct and indirect mechanisms of arachidonic acid release exist in LA-N-1 cell nuclei. Arachidonic acid and its metabolites markedly affect the neurite outgrowth and neurotransmitter release in cells of neuronal and glial origin. We propose that retinoic acid receptors coupled with phospholipases A2, C and D in the nuclear membrane play an important role in the redistribution of arachidonic acid in neuronal and non-nuclear neuronal membranes during differentiation and growth suppression. Abnormal retinoid metabolism may be involved in the downstream transcriptional regulation of phospholipase A2-mediated signal transduction in schizophrenia and Alzheimer disease (AD). The development of new retinoid analogs with diminished toxicity that can cross the blood-brain barrier without harm and can normalize phospholipase A2-mediated signaling will be important in developing pharmacological interventions for these neurological disorders.