Tumour necrosis factor-alpha (TNFalpha) is a pro-inflammatory cytokine, which influences neuronal survival and function yet there is limited information available on its effects on hippocampal neural precursor cells (NPCs). We show that TNFalpha treatment during proliferation had no effect on the percentage of proliferating cells prepared from embryonic rat hippocampal neurosphere cultures, nor did it affect cell fate towards either an astrocytic or neuronal lineage when cells were then allowed to differentiate. However, when cells were differentiated in the presence of TNFalpha, significantly reduced percentages of newly born and post-mitotic neurons, significantly increased percentages of astrocytes and increased expression of TNFalpha receptors, TNF-R1 and TNF-R2, as well as expression of the anti-neurogenic Hes1 gene, were observed. These data indicate that exposure of hippocampal NPCs to TNFalpha when they are undergoing differentiation but not proliferation has a detrimental effect on their neuronal lineage fate, which may be mediated through increased expression of Hes1.