We previously identified mNAT1 (murine N-terminal acetyltransferase 1) as an embryonic gene that is expressed in the developing brain and subsequently down-regulated, in part, by the onset of N-methyl-d-aspartate (NMDA) receptor function. By searching the data base we discovered a second closely related gene, mNAT2. mNAT1 and mNAT2 are highly homologous to yeast NAT1, a gene known to regulate entry into the G0 phase of the cell cycle. However, in the absence of further characterization, including evidence that mammalian homologues of NAT1 encode functional acetyltransferases, the significance of this relationship has been unclear. Here we focus on mNAT1. Biochemical analysis demonstrated that mNAT1 and its evolutionarily conserved co-subunit, mARD1, assemble to form a functional acetyltransferase. Transfection of mammalian cells with mNAT1 and mARD1 followed by immunofluorescent staining revealed that these proteins localize to the cytoplasm in both overlapping and separate compartments. In situ hybridization demonstrated that throughout brain development mNAT1 and mARD1 are highly expressed in areas of cell division and migration and are down-regulated as neurons differentiate. Finally, mNAT1 and mARD1 are expressed in proliferating mouse P19 embryonic carcinoma cells; treatment of these cells with retinoic acid initiates exit from the cell cycle, neuronal differentiation, and down-regulation of mNAT1 and mARD1 as the NMOA receptor 1 gene is induced. The results provide the first direct evidence that vertebrate homologues of NAT1 and ARD1 form an evolutionarily conserved N-terminal acetyltransferase and suggest that expression and down-regulation of this enzyme complex plays an important role in the generation and differentiation of neurons.