Normal human breast epithelial cells show a high degree of phenotypic plasticity in monolayer culture and express many traits that otherwise characterize tumor cells in vivo. Paradoxically, primary human breast carcinoma cells are difficult to establish in culture: most outgrowths arise from the normal tissue surrounding the tumor. These characteristics have posed major obstacles to the establishment of simple reliable criteria for mammary epithelial transformation in culture. In the present study, we show that a reconstituted basement membrane (BM) can be used to culture all normal human breast epithelial cells and a subset of human breast carcinoma cells. The two cell types can be readily distinguished by virtue of the ability of normal cells to reexpress a structurally and functionally differentiated phenotype within BM. Twelve specimens of normal breast tissue and 2 normal breast epithelial cell lines (total 14 samples) embedded in BM as single cells were able to form multicellular spherical colonies with a final size close to that of true acini in situ. Sections of mature spheres revealed a central lumen surrounded by polarized luminal epithelial cells expressing keratins 18 and 19 and sialomucin at the apical membrane. Significantly, two-thirds of normal spheres deposited a visible endogenous type IV collagen-containing BM even though they were in contact with exogenously provided BM. Growth was arrested completely within the same time period. In contrast, none of 6 carcinoma cell lines or 2 cultures of carcinoma from fresh samples (total 8 samples) responded to BM by growth regulation, lumen formation, correct polarity, or deposition of endogenous BM. These findings may provide the basis of a rapid assay for discriminating normal human breast epithelial cells from their malignant counterparts. Furthermore, we propose that the ability to sense BM appropriately and to form three-dimensional organotypic structures may be the function of a class of "suppressor" genes that are lost as cells become malignant.