A novel system is described for studying the growth of normal human mammary epithelium in vivo as grafts in athymic nude mice. The key feature of this model is reconstitution of the epithelial-stromal interactions required for normal growth and differentiation of the human mammary epithelium, which produces ducts that are comparable to those in the normal human mammary gland. Human breast epithelial organoids were combined with mammary fibroblasts from mouse or human origin in collagen gels, which were subsequently transplanted under the renal capsule of female nude mice hosts. The resulting grafts showed an increase in the ductal density compared with that observed previously. These ducts expressed appropriate markers for luminal and myoepithelial cells and steroid receptors. Treatment of the host with diethylstilbestrol or estradiol and progesterone significantly increased the number of ducts observed and increased cell proliferation. The grafts also displayed production of beta-casein and milk fat globule membrane protein when the hosts were allowed to become pregnant. This model allows for a variety of epithelial and stromal cells to be used in combination, which would aid in understanding key factors that regulate normal human mammary gland development.