These studies examined the potential for reorganization and differentiation of dissociated 18-day fetal rat intestine. Cultures of trypsin-dissociated fetal intestine were maintained in vitro for 1 week on a three-dimensional matrix, then transplanted into syngeneic hosts. When harvested after 4 weeks, these transplants consistently demonstrated organotypic differentiation. Spherical structures containing crypts with frequent mitotic figures and villi lined with columnar epithelium had formed. PAS staining demonstrated positive epithelial cell brush borders, goblet cells, and luminal contents. Significant levels of the microvillus membrane enzymes lactase, sucrase, maltase, and alkaline phosphatase were present in the luminal contents. Sucrase-isomaltase, an enzyme characteristic of postweaning small intestine, was demonstrated by immunoprecipitation and SDS-PAGE. Thus, both morphological and biochemical maturation occurred in the transplants.