The effects of stromal and hormonal environment on the immortalized but nontumorigenic human prostatic epithelial cell line BPH-1 were investigated in an in vivo model. BPH-1 cells were recombined with rat urogenital sinus mesenchyme (UGM), and the tissue recombinants were grafted to the renal capsule of adult male athymic mouse hosts. BPH-1 + UGM recombinants formed solid branching epithelial cords with a well-defined basement membrane. The cords canalized to form ductal structures. The mesenchymal cells formed thick sheets of well-differentiated smooth muscle surrounding the epithelium, reinforcing the idea that the epithelium dictates the patterning of prostatic stromal cells. When hosts carrying BPH-1 + UGM tissue recombinants were exposed to testosterone propionate and 17-beta-estradiol (T + E2), the tissue recombinants responded by forming invasive carcinomas, demonstrating mixed, predominantly squamous as well as adenocarcinomatous (small acinar and mucinous) differentiation. When either untreated or T + E2-treated hosts were castrated, epithelial apoptosis was observed in the grafts. When tumors were removed and regrafted to fresh hosts they grew rapidly. Tumors were serially regrafted through six generations. Histologically these tumors consisted largely of focally keratinizing squamous cell carcinoma with high-grade malignant cytological features. BPH-1 cells grown in the absence of UGM survived at the graft site but did not form tumors or organized structures. This behavior was not influenced by the presence or absence of T + E2 stimulation. These data show that an immortalized, nontumorigenic human prostatic epithelial cell line can undergo hormonal carcinogenesis in response to T + E2 stimulation. In addition, the data demonstrate that the stromal environment plays an important role in mediating hormonal carcinogenesis.