The adult derivatives of the embryonic forebrain germinal zones consist of two morphologically distinct cell layers surrounding the lateral ventricles: the ependyma and the subependyma. Cell cycle analyses have revealed that at least two proliferating populations exist in this region, one that is constitutively proliferating and one that is relatively quiescent and thought to include the endogenous adult neural stem cells. Earlier studies demonstrated that specific dissection of the region surrounding the lateral ventricles was necessary for the in vitro isolation of multipotent, self-renewing neural stem cells. However, in these studies, the ependymal layer was not physically separated from the subependymal layer to identify the specific adult laminar localization of the neural stem cells around the lateral ventricles. To determine which cellular compartment in the adult forebrain contained the neural stem cells, we isolated and cultured the ependyma separately from the subependyma and tested for the presence of neural stem cells using the in vitro neurosphere assay. We demonstrate that the ependymal cells can proliferate in vitro to form sphere-like structures. However, the ependymal cells generating spheres do not have the ability to self-renew (proliferate to form secondary spheres after dissociation) nor to produce neurons, but rather only seem to generate glial fibrillary acidic protein-positive ependymal cells when plated under differentiation conditions in culture. On the other hand, a subpopulation of subependymal cells do possess the self-renewing and multipotential characteristics of neural stem cells. Therefore, the adult forebrain neural stem cell resides within the subependymal compartment.