The mechanism of induction of tubular outgrowths in vitro on floating collagen gels and the influence of extracellular factors on this process have been investigated using the clonal rat mammary epithelial cell line, Rama 25. Growth of Rama 25 on such floating gels causes their contraction. Contraction of the gel is accompanied by a 10-fold increase in the number of cells per unit area, a change in cell shape, and a convolution of the epithelial cell sheet. Gels folded over manually show an 11-times higher incidence of tubules along the folds than on the flat surface. Tubular formation begins when cords of cells develop from local proliferations of the cell sheet and become canalized. Tubules follow wrinkles in the gel and branch to yield monopodial, dichotomous, or lobular architecture. Hydrocortisone and insulin, in the presence of serum, stimulate both narrow and thick tubular structures on folded gels, whereas extra additions of 1 ng/ml cholera toxin or 100 ng/ml epidermal growth factor preferentially stimulate thick tubular structures. Floating glutaraldehyde-fixed gels, very thick collagen gels, and collagen gels prepared on the top of rigid steel grids fail to support the formation of tubules, suggesting that flexibility and access of the medium to basal surfaces are important to their genesis. Incorporation of hyaluronic acid into the gel matrix preferentially inhibits the thick tubular outgrowths. Thus, the branching tubular structures generated by Rama 25 can be influenced in different ways by various extracellular factors in the medium and in the gel.