Using single cell suspensions from synovial fluid cells of arthritis patients, we observed differentiation of three-dimensional tissues in vitro. This new model of pannus-like tissue (PLT) might be useful to study pannus tissue formation and differentiation. In the PLT cultures, we observed two cell types, fibroblast-like and macrophage-like cells, defined by their distinct morphology and major histocompatibility complex (MHC) by human leukocyte antigen (HLA) class II expression. We could discriminate several intermediate steps of differentiation which finally led to 3D villi-like structures. Secretion of interferon gamma, interleukin-10, and tumor necrosis factor alpha was measured in the culture supernatants. Using methotrexate at various concentrations, the growth of PLT could be inhibited. We describe definite intermediate steps of differentiation. The present approach could be a suitable model for the in vitro study of pannus tissue formation.