Epithelial-mesenchymal interactions play a key role in the development of tissues such as tooth, lungs, and kidneys. To successfully engineer or repair such living tissues it is necessary to first understand the complex cell-cell and cell-matrix interactions underlying organogenesis. To mimic an in vivo setting it is necessary to assemble a three-dimensional matrix that would facilitate cell-cell interaction leading to proliferation and cellular differentiation. In this study, we have developed an in vitro three-dimensional multilayered coculture system using type I collagen and chitosan blends as matrices, to study epithelial-mesenchymal interactions that occur during tooth morphogenesis. Results from this study showed that the matrix composition influenced the migration, proliferation, and differentiation properties of the epithelial and mesenchymal cells. Specifically, the system supported the migration and differentiation of the HAT-7 epithelial cells and mesenchymal-derived dental pulp stem cells. Results from the in vivo implantation study of the coculture system in mice demonstrated a similar cellular migration and differentiation pattern that corroborates well with the in vitro model. Interestingly, the biopolymer matrix also permitted neovascularization in vivo.