Mixtures of epithelial and stromal cells isolated from normal adult rabbit cornea, when cocultured in the presence of cytochalasin B, produced latent collagenase, whereas neither cell type alone, nor the mixture in the absence of this agent, did so. The enzyme, a characteristic animal collagenase, required proteolytic activation. The relative concentrations of epithelial and stromal cells had a profound effect on on collagenase production, the enzyme activity bieng directly proportional to the number of stromal cells but inversely proportional to the number of epithelial cells. The amount of enzyme released into the medium was also directly proportional to cytochalasin B concentration. Media conditioned by cytochalasin B-treated epithelial or stromal cells did not stimulate collagenase secretion by the other cell type. The data suggest direct cell contact or close proximity as the mode of productive interaction and tentatively identify the stromal cell as the source of enzyme and the epithelial cell as a stimulator.