Airway epithelial stem cells are not well characterized. To examine clonal growth potential, we diluted single, viable B6.129S7-Gtrosa26 (Rosa26) mouse tracheal epithelial cells that constitutively express β-galactosidase into non-Rosa26 cells in an air-liquid interface cell culture model; 1.7% of the cells formed colonies of varying size, and, on average, 0.1% of the cells formed large colonies. Thus only a small subset of cells displayed progenitorial capacity suggestive of stem or early transient amplifying cells. Prior studies identified cells with high keratin 5 (K5) promoter activity in specific niches in the mouse trachea and these cells corresponded to the location of bromodeoxyuridine label-retaining cells, thought to be stem cells (Borthwick DW, Shahbazian M, Todd KQ, Dorin JR, and Randell SH, Am J Respir Cell Mol Biol: 24: 662–670, 2001). To explore the hypothesis that stem cells were present in the K5-expressing compartment, we created transgenic mice in which enhanced green fluorescent protein (EGFP) was driven by the K5 promoter. These mice expressed EGFP in most basal cells of the body including a subset of tracheal basal cells apparently located in positions similar to previously identified stem cell niches. Flow cytometrically purified EGFP-positive cells had an overall colony-forming efficiency 4.5-fold greater than EGFP-negative cells, but the ability to generate large colonies was 12-fold greater. Thus adult mouse tracheal epithelial cells with progenitorial capacity sufficient to generate large colonies reside in the basal cell compartment. These studies are a first step toward purification and characterization of airway epithelial stem cells.