We have previously described a method for the primary culture of adult large intestinal epithelium, suggesting that stem cells had survived both the isolation and the culture procedures. However, as no markers for such cells exist, confirmation of stem cell survival is difficult—only the functional properties can be used to define them. Unfortunately, many of these (e.g., differentiation, crypt regeneration) do not occur in culture, probably due to suboptimal conditions. To address this problem both freshly isolated and cultured small and large intestinal crypts were grown subcutaneously in an immunocompromized mouse. All initially formed cysts lined by a simple epithelium which gradually became multicellular and formed invaginations containing many mitoses and apoptoses. Epithelial differentiation, as assayed by Goblet cell mucin production, was also apparent. Mucin maturation was also typical of the normal intestine. The lumen was frequently filled with mucin and apoptotic bodies. Interestingly, in grafts displaying pronounced crypt-like morphology the regions of proliferation were situated toward the base of the structure and the Goblet cells toward the lumen, i.e., a typical crypt-like morphology. Hence, functional adult stem cells appear to survive isolation and tissue culture, permitting organotypic regeneration, possibly involving homeobox gene expression. This may now allow direct stem cell characterization and experimental manipulation, such as transfection, and may ultimately permit transplantation and therapeutic gene therapy.