Activin and the activin-binding protein follistatin modulate a variety of biological processes and are abundant at sites of muscle development. Activin and follistatin were expressed in developing chick pectoral muscle in vivo and in primary cell culture. Addition of recombinant activin inhibited muscle development in a dose-dependent manner as measured by the number of nuclei in myosin heavy chain positive cells and creatine phosphokinase activity. Conversely, follistatin potentiated muscle development. The effects of activin were found to be distinct from those of the related protein transforming growth factor (TGF) beta1. Muscle development was repressed by activin at all time points investigated and did not recover with the removal of activin following a limited exposure. In contrast, while myogenic differentiation in TGFbeta1 was initially repressed, muscle marker expression recovered to control levels--even in the continued presence of TGFbeta1. Fibroblast growth factor (FGF) had little effect on inhibiton of muscle development caused by activin A. However, inhibition of development produced by TGFbeta increased with increasing concentrations of FGF. Finally, early expression of myoD and myf5 mRNA by muscle cultures in the presence of activin and follistatin was analyzed. Activin-treated cultures expressed reduced myoD and myf5 levels at 1.5 days after plating. Myf5 levels in follistatin-treated cultures were elevated, but, surprisingly, these cultures showed a reduction in myoD levels. These data suggest that endogenously expressed activin and follistatin are important modulators of muscle development.