The ability of mouse forelimb buds at stage 1 (Wanek et al., '89a) of development to regenerate after amputation was investigated. The findings were as follows: 1. Outgrowths in the form of hillocks were found at the sites of amputation in 116 (95%) out of 122 embryos examined 24 hours after amputation. Examination of the amputated region after various intervals of time revealed that the outgrowths were established from flank tissues at the anterior and posterior borders of the wound. 2. Ectodermal thickening was found on the distal margin of the outgrowths in 21 (66%) out of 32 specimens examined. These thickenings were histologically similar to the apical ectodermal ridge (AER) present on the control limb buds. 3. Alkaline phosphatase activity was detected on the ectodermal thickening in 11 (79%) out of 14 experimental limb buds examined. The pattern of expression of alkaline phosphatase activity was similar to that observed in control limb buds. 4. There was no correlation between the size of the outgrowths and the presence of the ectodermal thickening or the enzymatic activity. The outgrowths developed despite the absence of ectodermal thickening and enzymatic activity, suggesting that the thickening and the presence of alkaline phosphatase are not crucial for the initiation and formation of the outgrowths. 5. Explants of the outgrowths, when grafted beneath adult kidney capsules, differentiated extensively into various tissues, which included bones, epiphyseal plates, skeletal muscles, and skin derivatives. Control explants also gave rise to the same spectrum of tissues. Hence, the flank tissues surrounding the site of amputation in E10 mouse embryos can regenerate to form a structure that is morphologically and histochemically similar to a limb bud and the mesenchyme within the structure is histogenetically competent to produce the variety of tissues that is normally found in the adult limb.