An important component of neuronal development is the matching of neurotransmitter expression with the appropriate target cell. We have examined how peptide transmitter expression is controlled in a simple model system, the avian ciliary ganglion (CG). This parasympathetic ganglion contains 2 distinct types of neurons: choroid neurons, which project to vasculature in the eye's choroid layer and use somatostatin as a co-transmitter with ACh, and ciliary neurons, which innervate the ciliary body and iris and use ACh but no known peptide co-transmitter. We have found that the earliest developmental stage in which neurons with somatostatinlike immunoreactivity (SOM-IR) are consistently found in vivo is stage 30 (embryonic day 6.5), a time shortly after the extension of neurites to targets in the eye's choroid layer. In cell culture, CG neurons expressed SOM-IR in co-culture with choroid cells, but not when cultured with striated muscle myotubes or with ganglion non-neuronal cells. No significant differences in neuronal survival or in ChAT activity were observed under these different co-culture conditions, which suggests that somatostatin expression is independently regulated. The stimulation of somatostatin expression was also specific in that other neuropeptides commonly found in autonomic neurons [neuropeptide Y (NPY), substance P (SP), vasoactive intestinal polypeptide (VIP)] were not induced in the presence of choroid cells. The ability to stimulate SOM-IR was not contact dependent because a macromolecule of greater than or equal to 10 kDa in choroid-conditioned medium (ChCM) was found to stimulate somatostatin expression in a dosage-dependent fashion. The somatostatin-stimulating activity induced SOM-IR in more than 90% of CG neurons, as well as in retrogradely labeled ciliary neurons, which would not normally express SOM-IR. Thus, the expression of somatostatin in cultured CG neurons is regulated by a macromolecule produced by cells in the choroid layer, a target normally innervated in vivo by CG neurons expressing somatostatin.