MDCK (Madin-Darby canine kidney) cells were cultured either dispersed within hydrated collagen gel (HCG) or seeded atop a collagen substrate and then immediately overlaid with HCG. Individual cells exhibited clonal growth in three dimensions to form spherical cysts made up of a simple epithelium enclosing a fluid-filled lumen. The cells of MDCK cysts were polarized with the basolateral surface in contact with the collagen gel and the apical surface bordering the lumen. The ultrastructure of MDCK cysts showed similarities to distal nephron. The cells bore apical microvilli and solitary cilia and had occluding junctions and a simple basolateral surface. MDCK cysts increased in size (greater than 800 microns diameter) with continued culture. MDCK cysts grown between layers of HCG were stripped free of the overlying collagen to give direct access to basolateral surface membrane. Unlike monolayer culture, morphogenetic clonal growth of cell line MDCK produces a polarized cell population with a true lumenal and basolateral surface. Collagen-gel-cultured MDCK cysts provide an easily manipulable in vitro cell system that may offer unique advantages for the study of renal cell structure and function.