Studies were performed to examine the hypothesis that the basal cells in the large conducting airways function as stem cells. Basal cells were isolated from the tracheas of adult rabbits using centrifugal elutriation procedures. Such cell isolates that contained > 90% basal cells were plated in culture at low cell density to produce individual basal cell clones. Clones were similarly obtained from unfractionated tracheal cells (mixed tracheal cells). Basal cell and mixed cell clones were tested to compare their in vitro growth capacity and their ability to reepithelialize denuded tracheal grafts with a mucociliary epithelium. Both basal cell and mixed cell clones underwent 15 to 20 population doublings in culture. The sizes of their clonogenic cell compartments were roughly similar. When inoculated into denuded tracheal grafts, both types of clones were equally efficient in establishing a mucociliary epithelium. The major secretory cell types observed in tracheas repopulated with the two types of cell clones were cells containing small secretory granules and either rough or smooth endoplasmic reticulum. Goblet cells were seen in ~ 40% of tracheas repopulated with either of the two types of cell clones. It is concluded that in rabbits tracheal basal cells can generate secretory cells with varying morphologic characteristics as well as ciliated cells and may be regarded as epithelial stem cells.