Epidermal growth factor, and its human homologue urogastrone (EGF/URO), are secreted by the gut-associated salivary and Brunner's glands. Recombinant EGF/URO is a powerful stimulator of cell proliferation and differentiation in the rodent and neonatal human intestine. But EGF/URO is not absorbed from the adult gut and has no action when given through the gut lumen; thus the role of secreted EGF/URO is unknown. We now report that ulceration of the epithelium anywhere in the human gastrointestinal tract induces the development of a novel cell lineage from gastrointestinal stem cells. This lineage initially appears as a bud from the base of intestinal crypts, adjacent to the ulcer, and grows locally as a tubule, ramifying to form a new small gland, and ultimately emerges onto the mucosal surface. The lineage produces neutral mucin, shows a unique lectin-binding profile and immunophenotype, is nonproliferative, and contains and secretes abundant immunoreactive EGF/URO. We propose that all gastrointestinal stem cells can produce this cell lineage after mucosal ulceration, secreting EGF/URO to stimulate cell proliferation, regeneration and ulcer healing. This cell lineage is very commonly associated with gastrointestinal mucosal ulceration, and we conclude that a principal in vivo role for EGF/URO is to stimulate ulcer healing throughout the gut through induction of this cell lineage in the adjacent mucosa.