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In developmental biology, cellular differentiation is the process by which a less specialized cell becomes a more specialized cell type. Differentiation occurs numerous times during the development of a multicellular organism as it changes from a single zygote to a complex system of tissues and cell types. Differentiation is a common process in adults as well: adult stem cells divide and create fully-differentiated daughter cells during tissue repair and during normal cell turnover. During differentiation a cell's size, shape, polarity, metabolic activity, and responsiveness to signals may change dramatically. These changes are largely do to highly-controlled modifications in gene expression. With a few exceptions, cellular differentiation almost never involves a change in the DNA sequence itself. Thus, different cells can have very different physical characteristics despite having the same genome.

A cell that is able to differentiate into many cell types is known as pluripotent. These cells are called stem cells in animals and meristematic cells in higher plants. A cell that is able to differentiate into all cell types is known as totipotent. In mammals, only the zygote and early embryonic cells are totipotent, while in plants, many differentiated cells can become totipotent with simple laboratory techniques. In cytopathology the level of cellular differentiation is used as a measure of cancer progression. "Grade" is a marker of how differentiated a cell in a tumor is.

Overview
In most multicellular organisms, not all cells are alike. For example, cells that make up the human skin are different from cells that make up the inner organs. Yet, all of the different cell types in the human body are derived from a single fertilized egg cell through differentiation. Differentiation is the process by which an unspecialized cell becomes specialized into one of the many cells that make up the body, such as a heart, liver, or muscle cell. During differentiation, certain genes are turned on, or become activated, while other genes are switched off, or inactivated. This process is intricately regulated. As a result, a differentiated cell will develop specific structures and perform certain functions.

Differentiation can involve changes in numerous aspects of cell physiology; size, shape, polarity, metabolic activity, responsiveness to signals, and gene expression profiles can all change during differentiation.

In cytopathology the level of cellular differentiation is used as a measure of cancer progression. "Grade" is a marker of how differentiated a cell in a tumor is.