The high local concentration of acetylcholine receptors (AChRs) at the vertebrate neuromuscular junction results from their aggregation by the agrin/MuSK signaling pathway and their synthetic up-regulation by the neuregulin/ErbB pathway. Here, we show a novel role for the neuregulin/ErbB pathway, the inhibition of AChR aggregation on the muscle surface. Treatment of C2C12 myotubes with the neuregulin epidermal growth factor domain decreased the number of both spontaneous and agrin-induced AChR clusters, in part by increasing the rate of cluster disassembly. Upon cluster disassembly, AChRs were internalized into caveolae (as identified by caveolin-3). Time-lapse microscopy revealed that individual AChR clusters fragmented into puncta, and application of neuregulin accelerated the rate at which AChR clusters decreased in area without affecting the density of AChRs remaining in individual clusters (as measured by the fluorescence intensity/unit area). We propose that this novel action of neuregulin regulates synaptic competition at the developing neuromuscular junction.The mammalian neuromuscular junction (NMJ) 1 is a cholinergic synapse composed of a muscle fiber, an axon terminal (located in a depression on the muscle surface known as the primary gutter), and a terminal Schwann cell. Within the postsynaptic membrane of the primary gutter, AChRs are concentrated at 10,000/ m 2 (1). This density is 1000-fold higher than in extrajunctional regions of muscle. Two protein signaling pathways contribute to the enrichment of acetylcholine receptors (AChRs) at the NMJ. The first involves the release of agrin from the axon terminal, which binds to the receptor tyrosine kinase MuSK on the muscle surface, and ultimately results in clustering of AChRs at the NMJ (reviewed in Ref. 2). The second pathway involves neuregulin, which is released from the axon terminal and activates ErbB receptor tyrosine kinases on the muscle surface, resulting in the up-regulation of AChR mRNA synthesis by subsynaptic myonuclei (reviewed in Refs. 3 and 4). Alternative splicing results in at least 14 vari-