Basal cell carcinomas resembling those of human skin were produced in rat skin by the local application of 3-methylcholanthrene. Fragments were transplanted into the uterus of estradiol-treated virgin females. Sizable tumors were obtained in 9 days to 3 weeks. Histological examination showed that increasing numbers of small basaloid tumor cells change into larger prickle cells of benign appearance, which form keratinizing foci and cysts within the growing tumor nodules and spread over the surface of the uterine lumen and glands, replacing columnar epithelium. Between 4 and 6 weeks after implantation, no nodular tumor growth was found, and progressively larger stretches of uterine lumen were covered with stratified epithelium, which by light microscopic standards resembled in morphology and behavior the epidermis spreading from normal skin implants under similar conditions. The results lend support to the thesis that the epithelial cells of basal cell carcinomas are stimulated to continuous neoplastic proliferation, are prevented from maturing by stimuli from specific tumor stroma, and will express their differentiation potential when exposed to normal stroma. The method used appears to provide a model of reconversion of neoplastic cells from malignant to benign behavior and to be amenable to further experimental analysis.