We have developed a method for embedding cells within a collagen matrix which allows sustained growth of mouse mammary tumor epithelial cells in primary culture. A characteristic and reproducible pattern of organization and growth occurs: the cells rearrange themselves and produce duct-like structures extending into the matrix, resulting in a three-dimensional outgrowth. Autoradiography showed continuous [3H]thymidine incorporation during 8 weeks in culture. An increase in DNA content of the cultured cells as a function of time was observed. Mouse mammary tumor cells cultured in the conventional monolayer system failed to show any significant increase in cell number during a culture period of 6 weeks. In addition, in such monolayer systems, cells progressively became detached from the dishes in long-term culture. The mammary epithelial cell origin of the collagen gel cell outgrowths was shown by electron microscopic demonstration of polarized cells containing tight junctions and budding mammary tumor virus particles. In addition, in vivo transplantation of collagen gel outgrowths resulted in the development of mammary adenocarcinoma histologically similar to the donor tumor. Cellular outgrowth patterns resembling those from tumor cells were also seen in similar collagen gel cultures of normal mammary cells from mouse and human and of hyperplastic alveolar nodule cells from mouse. The significance and usefulness of this system in comparison to the conventional monolayer system are discussed.