Proliferation of the adult NG2-expressing oligodendrocyte precursor cells has traditionally been viewed as a remyelination response ensuing from destruction of myelin and oligodendrocytes, and not to the axonal pathology that is also a characteristic of demyelinating disease. To better understand the response of the NG2+ cells to the different components of demyelinating pathology, we investigated the response of adult NG2+ cells to axonal degeneration in the absence of primary myelin or oligodendrocyte pathology. Axonal degeneration was induced in the hippocampal dentate gyrus of adult mice by transection of the entorhino-dentate perforant path projection. The acutely induced degeneration of axons and terminals resulted in a prompt response of NG2+ cells, consisting of morphological transformation, cellular proliferation, and upregulation of NG2 expression days 2-3 after surgery. This was followed by a reduction of cellular NG2 expression to subnormal levels from day 5 to 7 and reappearance of normal appearing NG2+ cells from day 10. Mice that had received repeated injections of bromodeoxyuridine from 24 to 72 h after surgery contained significant numbers of bromodeoxyuridine-incorporating oligodendrocytes in the areas with axonal degeneration at day 7. The results suggest that axonal degeneration induces a unique sequence of changes of NG2+ cells and that a subpopulation of the newly generated NG2+ cells differentiate into oligodendrocytes.