Transplantation studies demonstrate that an epithelial stem cell component must exist in the mouse mammary gland throughout life. Samples taken from any portion of the mammary gland at any age and at any developmental stage, including full functional differentiation, give rise to mammary epithelial outgrowths with complete developmental capacity. Cytological examination of mouse mammary gland explants revealed the presence of morphologically distinct cells distributed sporadically among the mammary epithelium, whose behaviour in vivo and in vitro suggested that they might represent a latent epithelial stem cell population. These pale-staining cells possessed large spherical nuclei, a clear cytoplasm and a round smooth-contoured shape. Electron microscopy confirmed their pale-staining characteristics and revealed a cytoplasm sparsely populated with organellar structures, such as mitochondria and endoplasmic reticulum. Their epithelial genealogy was demonstrated by the presence of terminal bars and tight junctions formed with their epithelial cell neighbours. In vivo, these cells were found among mammary epithelial cell populations in 16-day-old embryos onward in both ductal or lobular structures during all stages of pregnancy, lactation and involution. In explant cultures, these cells did not undertake a secretory morphology in the presence of lactogenic hormones, although occasionally they became immunologically positive for casein. They did not incorporate [³H]-thymidine into their nuclei under any of the experimental conditions used; however, they appeared to undergo mitosis within 4 h regardless of the presence or absence of hormone(s). At 24 h increased numbers of pale cells were found in pairs or in groups. At 72 h in the presence of IFPrl (medium containing insulin, hydrocortisone and prolactin), the pairs and groups of pale cells observed at 24 h were not found. Instead, individual pale cells were seen among groups of cytologically and functionally differentiated secretory epithelial cells. When lactogenic hormones were not present, groups of pale cells were still present in the explants at 72 h. These findings suggest that the pale cells are arrested at G_z phase of the cell cycle and that they give rise by mitosis to daughter cells capable of differentiating in the presence of lactogenic stimuli. Inhibition of DNA synthesis in the explants did not alter these cellular events.