During development of the central nervous system, stem and progenitor cell proliferation and differentiation are controlled by complex inter- and intracellular interactions that orchestrate the precise spatiotemporal production of particular cell types. Within the embryonic retina, progenitor cells are located adjacent to the retinal pigment epithelium (RPE), which differentiates prior to the neurosensory retina and has the capacity to secrete a multitude of growth factors. We found that secreted proteinaceous factors in human prenatal RPE conditioned medium (RPE CM) prolonged and enhanced the growth of human prenatal retinal neurospheres. The growth-promoting activity of RPE CM was mitogen-dependent and associated with an acute increase in transcription factor phosphorylation. Expanded populations of RPE CM-treated retinal neurospheres expressed numerous neurodevelopmental and eye specification genes and markers characteristic of neural and retinal progenitor cells, but gradually lost the potential to generate neurons upon differentiation. Misexpression of Mash1 restored the neurogenic potential of long-term cultures, yielding neurons with phenotypic characteristics of multiple inner retinal cell types. Thus, a novel combination of extrinsic and intrinsic factors was required to promote both progenitor cell proliferation and neuronal multipotency in human retinal neurosphere cultures. These results support a pro-proliferative and antiapoptotic role for RPE in human retinal development, reveal potential limitations of human retinal progenitor culture systems, and suggest a means for overcoming cell fate restriction in vitro. STEM CELLS 2008;26:3182-3193