Studies using in vitro cell culture systems of tracheobronchial epithelial cells provide useful models in which to study the regulation of proliferation and differentiation. The clonogenic cells derived from the tracheobronchial epithelium appears pluripotent. They have self-renewal capacity and can differentiate along a normal, muco-secretory pathway or a squamous cell pathway. Squamous differentiation in tracheobronchial epithelial cells is a multi-step process consisting of at least three stages. In the initial stage cells become committed to terminal cell division in which cells become irreversibly growth arrested. This is followed by the expression of the squamous differentiated phenotype and finally cornification. During squamous differentiation cells undergo changes in keratin expression. Some of these changes appear to be regulated at the post-transcriptional and likely at the translational or post-translational levels. Various factors such as several growth factors (TGFB, EGF), calcium ions, retinoids and phorbol esters regulate the program of differentiation at different stages. Retinoids do not affect the commitment to terminal cell division but inhibit the expression of the differentiated phenotype. This inhibition occurs at very low concentrations indicating that high affinity sites are involved in this action. Bryostatins, polycyclic lactones produced by bryozoan Bugula neritina, can bind to and activate protein kinase C similar to phorbol esters. However, bryostatins do not induce terminal differentiation in tracheobronchial cells as phorbol esters do. Moreover, bryostatins inhibit the commitment to terminal differentiation and the expression of the differentiated phenotype induced by phorbol esters. Bryostatin may act via a target other than protein kinase C. Tracheobronchial epithelial cell lines have been established using SV40-large T antigen after infection of normal tracheobronchial cells with a retroviral shuttle vector. These cell lines and carcinoma lines isolated from lung tumors exhibit altered responses to growth and differentiation regulatory factors. Alterations in the commitment to differentiation must be a crucial step in the transition towards a tumor cell.