Evidence based on immunocytochemical staining and ultrastructure suggests that morphological gradations between epithelial and myoepithelial cells, and possibly between epithelial cells and alveolar-like cells occur in terminal ductal structures of rat and human mammary glands. The benign carcinogen-induced rat and benign human mammary tumors can contain epithelial, myoepithelial-like and alveolar-like cells, whereas the malignant counterparts mainly contain only epithelial-like cells. Clonal epithelial cell lines from normal rat mammary glands, benign tumors, and SV40-transformed human mammary glands can differentiate to either myoepithelial-like or alveolar-like cells. In those of the rat, the differentiation processes occur in steps: intermediate cells along the myoepithelial-like pathway resemble intermediates in terminal ductal structures in vivo, and can also generate certain well-differentiated mesenchymal elements of the original tumours. Differentiation of the benign rat cells to alveolar-like cells with mammatrophic hormones and retinoids in vitro leads to a reduction in their tumor-forming ability in vivo. Cell lines from malignant rat mammary tumors of increasing metastatic potential and from human ductal carcinomas largely fail to yield myoepithelial-like or alveolar-like cells and are relatively slow-growing. Growth of the rat mammary epithelial cells in culture is stimulated by a pituitary-derived mammatrophic growth factor (PMGF), prostaglandin E2, and alpha-transforming growth factor; the response of the malignant cell lines to PMGF is reduced. It is suggested that stem cells exist in the rat and human glands that are capable of differentiating to the other major cell types of the mammary parenchyma, and that during the carcinogenic process they generate genetically unstable cells which lose their ability to differentiate and attempt to maximise their intrinsically slow growth rate.