The signals that guide the morphogenesis and differentiation of rat fetal gastric mucosa remain largely unknown. We have investigated the role of capsulin in pit/gland formation and epithelial cell differentiation in cultured stomach tissue. Embryonic day 16.5 (E 16.5) stomach tissue cultured for three days in the presence of 1 microM hydrocortisone underwent dramatic transformation, from undifferentiated, stratified cells to differentiated epithelia composed of polarised columnar cells with mucous cells and pit/glands. In the presence of capsulin antisense oligonucleotides directed against capsulin mRNA, tissues do not undergo further development. Significantly, both mucous granules and pit/gland formation were inhibited compared to capsulin sense/scrambled oligonucleotide treated controls. However, in tissues treated with specific anti-rat HGF-antiserum to neutralise secreted HGF, pit/gland formation was inhibited, but the number of mucous granules remained unchanged compared to controls treated with non-specific antiserum (mouse monoclonal cytokeratin 8 antiserum). This data suggests that capsulin may have a role in the morphogenesis of pit/glands and mucin granule formation in the developing rat gastric mucosa. We discuss the possibility that this role of capsulin may be partly mediated through the actions of HGF.