Epithelial and stromal cells were isolated from endometrium of Day 1 pseudopregnant rabbits by enzymatic digestion with trypsin or trypsin:collagenase:deoxyribonuclease. Dispersed cells were grown in RPMI 1640 supplemented with 10% whole or steroid-depleted fetal bovine serum (FBS). Epithelial and stromal cells reached confluency after 6 to 7 days in culture and showed specific characteristics. Cells could be differentiated according to morphology, growth patterns, electrophoretic patterns, and response to estrogen or progesterone. Hormonal stimulation of adenylate cyclase activity was measured in broken cell preparations by catalytic transformation of alpha-32P-adenosine triphosphate into 32P-adenosine 3'-5' cyclic monophosphate (cAMP). Adenylate cyclase activity was present in fresh endometrial tissue and in dispersed cells after 7 days in culture. The enzyme activity was significantly higher in stromal than in epithelial cells at all stimulation levels: basal (9.2 +/- 1.0 vs. 2.3 +/- 0.6, p less than 0.001) and guanosine triphosphate (GTP, 300 microM) (25.4 +/- 2.9 vs. 7.0 +/- 1.6, p less than 0.001). Net response to prostaglandin E2 (PGE2, 10 microM) was three times higher (p less than 0.001) in stromal (17 +/- 2) than in epithelial (5.0 +/- 1) cells. These results suggest that PGE2 can stimulate adenylate cyclase in rabbit endometrium and that the enzyme is preferentially localized in the stroma. Our results are in agreement with the hypothesis that cAMP formed in endometrium in response to PGE2 might be involved in the decidual reaction.