Nerve growth factor (NGF) is essential for the development and survival of sympathetic and sensory neurons. NGF binds to TrkA, activates the intrinsic kinase activity of TrkA, and promotes the differentiation of pheochromocytoma (PC12) cells into sympathetic-like neurons. Several signaling molecules and pathways are known to be activated by NGF, including phospholipase Cgamma, phosphatidylinositol-3 kinase, and the mitogen-activated protein kinase cascade. However, the mechanism of NGF-induced neuronal differentiation remains unclear. In this study, we examined whether SH2-Bbeta, a recently identified pleckstrin homology and SH2 domain-containing signaling protein, is a critical signaling protein for NGF. TrkA bound to glutathione S-transferase fusion proteins containing SH2-Bbeta, and NGF stimulation dramatically increased that binding. In contrast, NGF was unable to stimulate the association of TrkA with a glutathione S-transferase fusion protein containing a mutant SH2-Bbeta(R555E) with a defective SH2 domain. When overexpressed in PC12 cells, SH2-Bbeta co-immunoprecipitated with TrkA in response to NGF. NGF stimulated tyrosyl phosphorylation of endogenous SH2-Bbeta as well as exogenously expressed GFP-SH2-Bbeta but not GFP-SH2-Bbeta(R555E). Overexpression of SH2-Bbeta(R555E) blocked NGF-induced neurite outgrowth of PC12 cells, whereas overexpression of wild type SH2-Bbeta enhanced NGF-induced neurite outgrowth. Overexpression of either wild type or mutant SH2-Bbeta(R555E) did not alter tyrosyl phosphorylation of TrkA, Shc, or phospholipase Cgamma in response to NGF or NGF-induced activation of ERK1/2, suggesting that SH2-Bbeta may initiate a previously unknown pathway(s) that is essential for NGF-induced neurite outgrowth. Taken together, these data indicate that SH2-Bbeta is a novel signaling molecule required for NGF-induced neuronal differentiation.