A serum-free primary culture system has been developed which allows for three-dimensional growth and differentiation of normal rat mammary epithelial cells (RMECs) within an extracellular matrix preparation. RMECs were isolated from mammary glands of immature 50- to 60-d-old rats and the organoids embedded within a reconstituted basement membrane matrix prepared from the Engelbreth-Holm-Swarm sarcoma. Cells grown in a serum-free media consisting of phenol red-free Dulbecco's modified Eagle's medium-F12 culture medium containing 10 micrograms/ml insulin, 1 microgram/ml prolactin, 1 microgram/ml progesterone, 1 microgram/ml hydrocortisone, 10 ng/ml epidermal growth factor (EGF), 1 mg/ml fatty-acid-free bovine serum albumin (BSA), 5 micrograms/ml transferrin, and 5 microM ascorbic acid proliferated extensively (15- to 20-fold increase in cell number as quantitated using the MTT dye assay) over a 2- to 3-wk culture period and remained viable for months in culture. Several types of colonies were observed including the alveolarlike budding cluster which predominates at later times in culture, units with no or various degrees of ductal-like projections, stellate colonies, and two- and three-dimensional web units. Optimal proliferation required insulin, prolactin, progesterone, EGF, and bovine serum albumin. Hydrocortisone was not required for proliferation, but the colonies developing in its absence were morphologically altered, with a high frequency of colonies that formed an extensively branched network with many fine projections. Cell proliferation was also dependent on substratum, with significantly less growth and development occurring in RMECs grown within a type I collagen gel matrix compared to RMECs grown within the reconstituted basement membrane. In conjunction with other studies demonstrating extensive differentiation as well as proliferation, it is concluded that this model should prove to be an important tool to study the hormonal regulation of the growth and development of rat mammary cells.