To examine the functional differentiation of chloride cells in the yolk-sac membrane of tilapia (Oreochromis mossambicus) embryos, we developed a 'yolk-ball' incubation system in which the yolk sac was separated from the embryonic body and subjected to incubation in vitro. The yolk-ball preparation consists of the yolk and the covering yolk-sac membrane, which contains a rich population of chloride cells. After appropriate cutting, the incision on the yolk ball healed during incubation in balanced salt solution for 3h, so that the yolk-sac membrane completely enclosed the yolk. Yolk balls prepared from freshwater-acclimated embryos were transferred either to fresh water or to sea water and incubated for 48 and 96 h to elucidate the morphological changes in the chloride cells in response to environmental salinity. The chloride cells in the yolk-sac membrane were larger in sea water than in fresh water. In yolk balls transferred to sea water, chloride cells often formed multicellular complexes characteristic of seawater-type chloride cells. In those transferred to fresh water, however, the cells were small and rarely formed such complexes. These responses of chloride cells were identical to those observed in intact embryos. Thus, chloride cells in the yolk-sac membrane could differentiate into the seawater type independent of the embryonic body. To examine the possible effects of exogenous cortisol on chloride cell differentiation, the yolk balls were incubated for 48 h in fresh water or sea water containing different doses of cortisol (0.1-10 microg x ml(-1)). Although chloride cells were consistently larger in sea water than in fresh water in all experimental groups, cortisol administration had no effect on chloride cell surface area in either medium. These findings indicate that the chloride cells in the yolk-sac membrane are equipped with an autonomous mechanism of functional differentiation that is independent of the embryonic endocrine and nervous systems. The yolk-ball incubation system established here is an excellent experimental model for further studies on chloride cell differentiation and function.