The epithelia of the lung are complex structures that play an important role in normal lung physiology and are often involved in the pathophysiology of pulmonary diseases. The dynamics of cell turnover, lineage, and differentiation within these epithelia are complex and poorly understood. We have coupled the technique of retrovirus-mediated gene transfer with a xenograft model of proximal human airway to evaluate pathways of cellular proliferation and differentiation in human bronchial epithelia. Primary isolates of human bronchial epithelial cells (HBECs) were infected with mixtures of recombinant retroviruses expressing different reporter genes and seeded into denuded rat trachea, which were implanted subcutaneously into athymic mice. The HBECs were allowed to regenerate for four weeks in xenografts, which were then explanted. Clonal expansion of individual retrovirus-marked cells in the regenerated human bronchial epithelium was detected as clusters of transgene-expressing cells. Clone size varied with seeding density, resulting in the largest clones comprising 10(3)-10(4) cells. A substantial number of clones showed transgene expression in basal as well as differentiated columnar cells, a finding that appeared independent of clone size. These studies demonstrate the existence of a cell type within the human bronchial epithelium that is capable of extensive self-renewal and pluripotent development. Further characterization of these potential stem cells will be important in defining pathogenesis of pulmonary diseases and in developing novel approaches to treatment such as gene therapy.