The chemical differentiation of somatostatin (SS) neurons in rat neocortex was characterized by molecular biochemical and morphological methods. Northern (RNA) blotting indicates that regional distribution of SS mRNA correlates with the known distribution patterns of SS-containing neurons in the adult, while similar analysis of poly (A)+ RNA isolated from telencephalon at various times postnatally shows an increase between P9 and P15, with a slight decrease in the adult. In situ hybridization with a probe specific to SS mRNA, and immunohistochemistry using antisera specific for the N-terminally extended form of SS, SS28, and SS28(1-12), were used to detect neocortical neurons containing this mRNA or its translation product. The appearance of SS mRNA is coincident with detectable immunoreactivity for SS peptides. The expression of the SS gene by cortical neurons occurs in two waves. From P1 to P11, hybridizing neurons are predominant below the cortical plate in the developing infragranular layers. Immunohistochemical analysis of immunoreactivity to SS28 reveals a significant development of this neocortical system by late gestation (E20). At this point SS28(1-12), the predominant SS form detected, is mainly in neurons of the subplate, with less detectable immunoreactivity in the intermediate zone and cortical plate. By P2, neurons in the subplate exhibit detectable SS28 and SS28(1-12). Although immunoreactive perikarya are no longer detectable at P2 in the cortical plate or marginal zone, a very dense plexus of SS28(1-12) fibers is seen in the subplate, marginal zone, and intermediate zone; relatively few immunoreactive fibers are found in the cortical plate. By P12, a dramatic shift occurs; a large supragranular population of these SS neurons is observed by both mRNA and antibody methods, as is a subsequent decrease in number in the adult. The shift in immunoreactivity occurs with supragranular SS28-containing neurons now prominent, and SS28(1-12)-containing neurons and fibers greatly diminished. The number of neurons containing SS mRNA or SS28 immunoreactivity decreases from P12 to adult, when these neurons exhibit a bilaminar distribution. Neurons immunoreactive for SS28(1-12) are now sparsely distributed throughout the cortex, while SS28(1-12) fibers densely innervate layers I and V/VI.