Retinoic acid (RA) induces cell cycle arrest and differentiation of human neuroblastoma (NB) cells. Typically, NB cells differentiate along the neuronal lineage, but quiescent, "flat" cell types frequently have been described after treatment with differentiating agents. Two indistinguishable subclones of the cell line SK-N-SH, SK-N-SH-N (SH-N) and SK-N-SH-F (SH-F), display dramatically different responses to RA. In SH-N, RA induces neuronal differentiation, but in SH-F it transforms the small neuroblastic cells into large, flattened, epithelium-like cells. Here we analyze the mechanistic basis for the different effects of RA in the two NB subclones. First, we show that the flattened RA-treated SH-F expresses markers of cells undergoing replicative senescence. Inhibition of DNA synthesis by RA is significantly more rapid in SH-F than in SH-N. SH-F, which expresses basal amounts of p16(INK4A), responds to RA with elevation of p18(INK4C), marked down-regulation of cyclin D1, and swift inhibition of cyclin D-dependent kinases (cdks). Conversely, after addition of RA, SH-N retains cell cycling due to high expression of cyclin D1, the absence of Ink4 inhibitors, and accumulation of p21(Cip1). These changes result in sustained cdk activity. Accordingly, overexpression of p21(Cip1) but not p16(INK4A) induces neuronal differentiation of untreated NB cells. We propose that rapid inhibition of cdks by RA in NB leads to early cell cycle arrest, prevents neuronal differentiation, and results in a senescence-like state.