It has been suggested that one of the major functions of the apical ectodermal ridge (AER) of the embryonic chick limb-bud is to maintain mesenchymal cells directly subjacent to it (i.e. cells extending 0.4-- 0.5 mm from the AER) in a labile, undifferentiated condition. We have attempted to directly test this hypothesis by subjecting the undiffertiated subridge mesoderm of stage-25 embryonic chick wing-buds to organ culture in the presence and absence of the AER and the ectoderm that normally surrounds the mesoderm dorsally and ventrally. During the period of culture, control explants comprised of the subridge mesoderm capped by the AER and surrounded by the dorsal/ventral ectoderm undergo progressive morphogenesis characterized by polarized proximal to distal outgrowth and changes in the contour of the developing explant, and ultimately form a structure grossly resembling a normal distal wing-bud tip. In contrast, explants from which the AER and dorsal/ventral ectoderm have been removed (minus ectoderm explants) or from which just the AER has been removed (minus AER explants) form compact, rounded masses exhibiting no signs of morphogenesis. During the polarized proximal to distal outgrowth control explants undergo during the first 3 days of culture, as cells of the explant become located greater than 0.4--0.5 mm from the AER, they concomitantly undergo a sequence of changes indicative of their differentiation into cartilage. However, those cells which remain 0.4--0.5 mm from the AER during this period retain the characteristics of non-specialized mesenchymal cells. In marked contrast to control explants, virtually all of the cells of minus ectoderm explants initiate chondrogenic differentiation during the first day of culture. Cells comprising the central core of minus AER explants also initiate chondrogenic differentiation during the first day of culture, but in contrast to minus ecotderm explants, non-chondrogenic tissue types form along the periphery of the explants subjacent to the dorsal/ventral ectoderm. These results indicate that the AER maintains cells directly subjacent to it in a labile, undifferentiated condition, and that when mesenchymal cells are freed from the AER's influence either artificially or as a result of normal polarized outgrowth, they are freed to commence cytodifferentiation. The results further suggest that the dorsal/ventral ectoderm may have an influence on the differentiation of the mesenchymal cells directly subjacent to it, once the cells have been removed from the influence of the AER.