Madin-Darby canine kidney (MDCK) cells grown in tissue culture have the morphological properties of distal tubular epithelial cells, form tight junctions, and lack several proximal tubular enzyme markers. Adenylate cyclase in these cells was stimulated by vasopressin, oxytocin, prostaglandins E1 and E2, glucagon, and cholera toxin. Hormone-stimulated adenylate cyclase activity in isolated membrane preparations was dependent on low concentrations of GTP and had the MgCl2 and pH optima expected for the kidney enzyme. The results, as well as the demonstration of enhanced hemicyst formation induced by cyclic AMP, suggest that the MDCK cell line has retained the differentiated properties of the kidney epithelial cell of origin. When MDCK cells were injected into baby nude mice, continuous nodule growth was observed until adulthood was attained. Histological studies revealed the presence of two cell types: normal mouse fibroblasts which comprise 80--90% of the solid nodule mass, and MDCK cells, which formed epithelial sheets lining internal fluid-filled glands. Electron microscope analysis showed that the mucosal surfaces of the cells were characterized by microvilli which faced the lumen of the glands, that adjacent MDCK cells were joined by tight junctions, and that the serosal surfaces of the epithelial sheets were characterized by smooth plasma membranes which were lined by a continuous basement membrane. These observations lead to the conclusion that the MDCK cells retain regional differentiation of their plasma membranes and the ability to regenerate kidney tubule-like structures in vivo.