Epithelial morphogenesis is supported by diffusible growth factors and by nondiffusible cell substrata, such as laminin and fibronectin. When embedded in a laminin-rich basement-membrane substratum, embryonic mouse submandibular epithelium undergoes cell proliferation and branching morphogenesis in response to epidermal growth factor (EGF) in mesenchyme-free culture but not in serum-free medium. In this study, we sought to identify the biologically active factor in serum. As this factor was heat-stable and trypsinresistant, the lipid fraction was analyzed. Horse serum was fractionated by ethanol extraction, Folch partition with chloroform-methanol-water, and high-performance liquid chromatography, and we tested the branch-inducing activity of each fraction. We also analyzed the partially purified fraction with a mass spectrometer, indicating that the active fraction largely consisted of lysophosphatidyl-hexose. Finally we identified the molecule as lysophosphatidic acid (LPA), because, whereas lysophosphatidyl-inositol had only a slight branch-inducing activity, its relevant LPA fully substituted for serum and induced branching morphogenesis in cooperation with EGF. LPA receptor genes were expressed in submandibular epithelial cells. DNA-synthesizing cells were abundant only when cultured in the presence of both EGF and LPA, but not either singly. Developmental Dynamics 235:403-410, 2006.