A human embryonal carcinoma (EC) cell line, NCR-G3 (G3), is capable of differentiating into a variety of cell types in vitro, including epithelial, muscle, neural and trophoectodermal cells. The production of human chorionic gonadotropin (hCG), a trophoectoderm-specific hormone, begins 7 days after retinoic acid (RA) treatment and peaks on day 12–13. In this study, we used G3 cells to investigate the biological significance of macrophage colony-stimulating factor (M-CSF), also called colony-stimulating factor-1 (CSF-1), and fms, a receptor tyrosine kinase for M-CSF. The mRNA of c-fms is constitutively expressed in both undifferentiated and differentiated G3 cells. Immunoprecipitation with anti-fms antibodies or flow cytometry revealed that differentiated G3 cells express fms on the cell surface. However, we were unable to demonstrate expression of fms on the surface of undifferentiated G3 cells. Expression of M-CSF mRNA and protein, however, was upregulated by RA treatment prior to hCG production. In order to investigate whether expression of both molecules is biologically functional in G3 cells, we conducted experiments using anti-M-CSF and fms antibodies with neutralizing activity and gene transfer to achieve over-expression of fms in G3 cells. As a result, we observed that hCG production following treatment with both neutralizing antibodies was more than 90 per cent inhibited, and that hCG production increased significantly as a result of over-expression of fms in G3 cells. Our results enabled us to show that M-CSF and fms play important functional roles in the differentiation of G3 cells into trophoectoderm. G3 cells are well suited to serve as an experimental model of human early embryogenesis and of placental differentiation.