A major risk factor for cervical cancer is persistent infection with high-risk human papillomaviruses (HPV) which can cause cervical intraepithelial neoplasia. Greater than 90% of cervical cancers develop in the transformation zone (TZ), a small region of metaplastic squamous epithelium at the squamocolumnar junction between endocervix and ectocervix. However, it is unclear why this region is highly susceptible to malignant progression. We hypothesized that cells from TZ were more susceptible to dysplastic differentiation, a precursor to cervical cancer. We used three-dimensional organotypic culture to compare differentiation of HPV16-immortalized epithelial cell lines derived from ectocervix, TZ, and endocervix. We show that immortal cells from TZ or endocervix form epithelia that are more dysplastic than immortal cells from ectocervix. A higher percentage of immortal cells from TZ and endocervix express the proliferation marker Ki-67 and are positive for phospho-Akt. Immortal cells from TZ and endocervix invade collagen rafts and express increased levels of matrix metalloproteinase-1. Inhibition of MMP-1 or Akt activity blocks invasion. We conclude that HPV16-immortalized cells cultured from TZ or endocervix are more susceptible to dysplastic differentiation, and this might enhance their susceptibility to cervical cancer.