Trunk neural crest cells segregate from the neuroepithelium and enter a 'migration staging area' lateral to the embryonic neural tube. After some crest cells in the migration staging area have begun to migrate on a medial pathway, a subpopulation of crest-derived cells remaining in the migration staging area expresses mRNAs for the receptor tyrosine kinase, c-kit, and tyrosinase-related protein-2, both of which are characteristic of melanocyte precursors. These putative melanocyte precursors are subsequently observed on the lateral crest migration pathway between the dermatome and overlying epithelium, and then dispersed in nascent dermal mesenchyme. Melanocyte precursors transiently require the c-kit ligand, Steel factor for survival. Although Steel factor mRNA is transiently expressed in the dorsal dermatome before the onset of trunk neural crest cell dispersal on the lateral pathway, it is no longer produced by dermatomal cells when melanocyte precursors have dispersed in the dermal mesenchyme. To assess the role of Steel factor in migration of melanocyte precursors on the lateral pathway, we analyzed melanocyte precursor dispersal and fate on the lateral pathway of two different Sl mutants, Sl, a null allele, and Sld, which lacks cell surface-associated Steel factor but produces a soluble form. No melanocyte precursors were detected in the dermatome of embryos homozygous for the Sl allele or in W mutants that lack functional c-kit. In contrast, in embryos homozygous for the Sld allele, melanocyte precursors appeared on the lateral pathway, but subsequently disappear from the dermis. These results suggest that soluble Steel factor is required for melanocyte precursor dispersal on the lateral pathway, or for their initial survival in the migration staging area. In contrast, membrane-bound Steel factor appears to promote melanocyte precursor survival in the dermis.