To investigate the role of estrogen and androgen in prostatic differentiation and induction of epithelial hyperplasia, we studied ultrastructural and biochemical responses to estradiol-17 beta 17-cyclopentylpropionate (ECP) and 5 alpha-androstane-3 alpha, 17 beta-diol dipropionate (3 alpha-diol DP) in glands of castrated dogs. The hormones were injected individually or in combination. Organ cultures, incubated with 1.7 microM radioisotope-labeled testosterone in serum-free Trowell T8 medium, were used to compare capacities of key transforming enzymes in hormone-modified glands. High-affinity binding of labeled 8.5 nM estradiol-17 beta and 5 alpha-dihydrotestosterone (5 alpha-DHT) to 0.4 M KCl-extractable explant protein was also determined. Treatment with 1 mg. of ECP per week for 2 weeks produced basal cell mitosis and early squamous metaplasia. The glandular epithelium hypertrophied but was not repopulated. When compared with radiotestosterone disposition by explanted prostate from untreated castrates, increased formation and egress of 17-oxo C19O2 steroids, predominantly 4-androstene-3,17-dione, occurred at the expense of 5 alpha-reduced 17 beta-hydroxy C19O2-steroids and hydroxylated metabolites. Administration of 2 x 50 mg. of 3 alpha-diol DP per week for 2 weeks also induced basal cell proliferation. The glandular epithelium was repopulated, and atrophic glandular cells were partially restored. This treatment increased accumulation of radiotestosterone-derived 5 alpha-reduced C19O2-metabolites and C19O3-steroids in the explants. Joint administration of ECP and 3 alpha-diol DP yielded proliferating squamous and glandular cells within the same acinus. Each type of proliferating cell was identified by specific cytologic markers. Chromosomes were observed with tonofilament bundles in squamous cells and with secretory granules in glandular cells. However, most glandular cells were not dividing. They were characterized by co-existing tonofilament bundles and secretory granules. The dual hormone administration increased radiotestosterone metabolism. The separate effect of each hormone was notable since estrogen increased the ratio of 17-oxo C19O2 to 5 alpha-reduced 17 beta-hydroxy C19O2-metabolites, whereas androgen restored both terminal hydroxylations and high-affinity binding of 5 alpha-DHT. The levels of saturable binding of estradiol-17 beta were high but variable in explants of each treatment group. We conclude that estrogen and androgen act cooperatively and synergistically on basal cells of regressed canine prostate to induce divergently differentiated epithelial cells. Together with stromal components, these glandular and squamous cells express distinctive pathways of androgen disposition.