Nerve growth factor (NGF) exerts a variety of actions during embryonic development. At the early stages of inner ear development, NGF stimulates cell proliferation, an effect mediated through low-affinity receptors. We have studied the possibility that the glycosyl-phosphatidylinositol/inositol phosphoglycan (glycosyl-PtdIns/IPG) system is involved in transmitting this NGF signal. Endogenous glycosyl-PtdIns was characterized in extracts of cochleovestibular ganglia (CVGs) that incorporated [3H]glucosamine, [3H]galactose, [3H]myristic acid, and [3H]palmitic acid. Incubation of CVG with NGF produced a rapid and transient hydrolysis of glycosyl-PtdIns. Hydrolysis was complete at 100 ng/ml, and the half-maximal effect occurred at 25 ng/ml, overlapping with the concentration dependence of the mitogenic effect of NGF. An IPG was isolated from embryonic extracts. It had biological effects similar to those reported for the insulin-induced IPG in other tissues. It exerted a powerful mitogenic effect on CVG, comparable to that of NGF. Both the IPG- and NGF-induced cell proliferation were blocked by anti-IPG antibodies that recognized the endogenous IPG on a silica plate immunoassay. These results show that CVG possesses a fully active glycosyl-PtdIns/IPG signal transduction system and that the proliferative effects associated with NGF binding to low-affinity receptors require IPG generation.