During bladder development, undifferentiated mesenchymal and epithelial cells undergo an orderly sequence of differentiation defined by the expression of smooth-muscle (alpha-actin, myosin, vinculin, desmin, vimentin, and laminin) and epithelial (cytokeratins 5, 7, 8, 14, 18 and 19) protein markers. This process requires mesenchymal-epithelial interactions with bladder epithelium (urothelium) necessary for the differentiation of bladder smooth muscle. Peptide growth factors such as keratinocyte growth factor (KGF) and transforming growth factors (TGF) alpha and beta are likely candidates as mediators of these mesenchymal-epithelial interactions. Transcripts for KGF, TGF alpha, and TGF beta are regulated during bladder development and during smooth-muscle hypertrophy secondary to bladder-outlet obstruction. Finally, two experimental bladder models--(1) partial outlet obstruction and (2) regeneration of bladder smooth muscle into an acellular tissue matrix--are described in the context of mesenchymal-epithelial interactions in the bladder.