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A complex set of extracellular signals is required for neural crest (NC) specification. However, how these signals function to coordinate cell-cycle progression and differentiation remains poorly understood. Here, we report in Xenopus a role for the transcription factor signal transducers and activators of transcription-3 (Stat3) in this process downstream of FGF signalling. Depletion of Stat3 inhibits NC gene expression and cell proliferation, whereas overexpression expands the NC domain and promotes cell proliferation. Stat3 is phosphorylated and activated in ectodermal cells by FGFs through binding with FGFR4. Stat3 activation is also modulated by Hairy2 and Id3 proteins that, respectively, facilitate and disrupt Stat3-FGFR4 complex formation. Furthermore, distinct levels of Stat3 activity control Hairy2 and Id3 transcription, leading to Stat3 self-regulation. Finally, high Stat3 activity maintains cells in an undifferentiated state, whereas low activity promotes cell proliferation and NC differentiation. Together, our data suggest that Stat3, downstream of FGFs and under the positive and negative feedback regulation of Hairy2 and Id3, plays an essential role in the coordination of cell-cycle progression and differentiation during NC specification.
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