The objective of this study was to examine the differentiation potential of basal cells purified from rabbit tracheas by means of centrifugal elutriation. Cells suspensions containing between 83 and 94% basal cells were inoculated into tracheal grafts denuded of their own epithelium and transplanted to the backs of nude mice. Within 1 week after inoculation, the basal cells reestablished a continuous poorly differentiated epithelial sheet which at 2 to 4 weeks showed typical mucociliary differentiation. Basal cells, ciliated cells, goblet cells, and secretory cells with small granules were present. Some of the latter contained abundant rough endoplasmic reticulum and others contained predominantly smooth endoplasmic reticulum. These data indicate that basal cells can give rise to all major tracheal cell types suggesting that they are the main stem cell in the large airways of rabbits.