Segregation of the apical and basolateral plasma membrane domains is the key distinguishing feature of epithelial cells. A series of interrelated cues and processes follow this primary polarization event, resulting in the morphogenesis of the mammalian epithelium. This review focuses on the role of the interactions between the extracellular matrix and neighbouring cells during the initiation and establishment of epithelial polarity, and the role that membrane transport and polarity complexes play in this process. An overview of the formation of the apical junctional complexes is given in relation to the generation of distinct membrane domains characterized by the asymmetric distribution of phosphoinositides and proteins. The mechanisms and machinery utilized by the trafficking pathways involved in the generation and maintenance of this apical-basolateral polarization are expounded, highlighting processes of apical-directed transport. Furthermore, the current proposed mechanisms for the organization of entire networks of cells into a structured, polarized three-dimensional structure are described, with an emphasis on the proposed mechanisms for the formation and expansion of the apical lumen.