Expression of polysialic acid (PSA) promotes migration of progenitor cells from the subventricular zone (SVZ) to the olfactory bulb, where they differentiate into interneurons. This differentiation has been found to coincide with a loss of PSA. Moreover, specific removal of PSA from the mouse SVZ by endoneuraminidase‐N was found to cause premature differentiation, as evidenced by neurite outgrowth and tyrosine hydroxylase synthesis in vivo and by expression of neurofilament‐L and βIII‐tubulin in SVZ explant cultures. This differentiation involved activation of mitogen‐activated protein kinase through p59fyn and was blocked by its inhibition. The effects of PSA removal were found to be cell contact‐dependent and to be reduced by anti–neural cell adhesion molecule antibodies. These findings indicate that PSA expression regulates the fate of SVZ precursors by two contact‐dependent mechanisms, the previously reported reduction in cell–cell adhesion that allows cell translocation, and the postponement of cell differentiation that otherwise would be induced by signals generated through surface molecule‐mediated cell–cell interactions. Developmental Dynamics 230:675–684, 2004. © 2004 Wiley‐Liss, Inc.