Human ependymal cells were investigated before and after intraocular xenografting of fetal spinal cord to nude rats. Although most cells in the embryonic ependymal layers were undifferentiated, poorly differentiated cells lined the primitive central canal of 8-week-old fetal spinal cord. Mature ependymal cells were found in two different structures in transplanted spinal cord after 8 to 12 months, one a central canal-like structure and the other a disorganized structure composed of packed cells and microcysts. The central canal-like structure contained typical columnar ependymal cells with microvilli, cilia, and junctional complexes (zonulae adherentes). Tanycytes were also observed in this structure. The structure composed of packed cells consisted of abnormal ependymal cells with intracellular microvilli and cilia arranged chaotically and adhering to each other by means of irregular junctions. Evidence of pluripotentiality of ependymal cells was not found, even in the disorganized structures. Similarities and differences in ependymal cell differentiation between grafts and tumors are also discussed. The microenvironment appears to be a factor in the induction of cellular polarity and normal development of ependymal cells.