This study was designed to investigate morphological changes in the tympanic membrane (TM) associated with cholesteatoma formation in experimental animals following application of propylene glycol to the middle ear. A 50% solution of propylene glycol was applied bilaterally to the middle ear cavities of 30 young-adult chinchillas. The animals were sacrificed for light and electron microscopic study at intervals of 2 days to 6 weeks after a single application of 0.2 ml of the propylene glycol solution. At 2 days there was complete destruction of the epidermal and mucosal layers of the TM. The denuded lateral surface rapidly became re-epithelialized by hyperplastic epidermal cells and by 2-3 weeks, keratinizing epidermis penetrated damaged areas of the fibrous layer of the lamina propria to reach the medial surface of the TM. These epidermal cells proliferated in the middle ear cavity, forming cholesteatomas. Our observations indicate that invasion of the intact, but structurally altered, tympanic membrane by hyperplastic epidermis is a primary mechanism of cholesteatoma formation in the animal model.