This paper defines a generative probabilistic model of parse trees, which we call PCFG-LA. This model is an extension of PCFG in which non-terminal symbols are augmented with latent variables. Finegrained CFG rules are automatically induced from a parsed corpus by training a PCFG-LA model using an EM-algorithm. Because exact parsing with a PCFG-LA is NP-hard, several approximations are described and empirically compared. In experiments using the Penn WSJ corpus, our automatically trained model gave a per40 formance of (F , sentences words), which is comparable to that of an unlexicalized PCFG parser created using extensive manual feature.