The effect of human recombinant Mullerian Inhibiting Substance (MIS) on the regression of the Mullerian duct (MD) of female rat fetuses was examined in vitro to determine whether MIS acts on MD epithelium and/or mesenchyme at the critical periods of sexual differentiation. Urogenital ridges (URs) of female rat fetuses at 14.5- to 18.5-days of gestation (plug day = 0) were cultured for 3 days with or without recombinant human MIS in CMRL 1066 medium with 10% female fetal calf serum. In URs from 14.5- and 15.5-day-old fetuses, the cranial portion of the MD regressed almost completely during the 3-day culture period in the presence of MIS, whereas the caudal half to third of the MD remained intact but tapered to a fine point cranially. MDs survived in URs from 16.5-day-old fetuses cultured in the presence of MIS except that the cranial portion of the MDs was deformed. MIS did not elicit regression of MDs in URs obtained from 17.5- and 18.5-day-old fetuses, but instead caused the MD epithelium to form bulges projecting into the mesenchyme. MD epithelium at 15.5-days of gestation was separated from the surrounding UR mesenchyme, and both components (MD epithelium and mesenchyme) were cultured separately for 3 days in the presence or absence of MIS. Both epithelial and mesenchymal cells survived in the presence or absence of MIS. MD epithelium formed typical epithelial colonies, whereas UR mesenchyme spread as fibroblastic cells. Analysis of labeling index after incorporation of [3H] thymidine demonstrated that MD epithelial DNA synthesis was not influenced by MIS. In contrast, mesenchymal labeling index was reduced significantly by MIS. This effect of MIS on UR mesenchyme in conjunction with earlier histological observations of mesenchymal condensation during MD regression and an absence of direct effects of MIS on the epithelium suggests that MIS elicits its effect on the MD epithelium via the surrounding mesenchyme.