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Lung fragments from 10 human fetuses aged 10 to 14 weeks of gestation were implanted into athymic "nude" mice. Cytodifferentiation of the transplants was studied by both scanning and transmission electron microscopy. Two weeks after implantation mitotic figures of epithelial and stroma cells were observed. In five week old transplants ciliated as well as endocrine cells were found dispersed among undifferentiated bronchial epithelium. During further experimental period epithelial differentiation in the transplants proceeded. Thus, eight week old implants assumed the morphologic appearance of fetal lungs in the canalicular stage displaying prospective type I and II pneumocytes. In addition stroma cells also differentiated forming mature fibroblasts and myofibroblasts. Our study indicates that human fetal lung tissue transplanted into "nude" mice not only grow but even differentiate. Xenogeneic transplantation of human fetal cells and tissues, therefore, offers additional opportunities to investigate the prenatal development of human tissues.