In considering the mechanism of transformation of epithelium to mesenchyme in the embryo, it is generally assumed that the ability to give rise to fibroblast-like cells is lost as epithelia mature. We reported previously that a definitive embryonic epithelium, that of the anterior lens, gives rise to freely migrating mesenchyme-like cells when suspended in type I collagen matrices. Here, we show that a highly differentiated epithelium that expresses cytokeratin changes to a vimentin cytoskeleton and loses thyroglobulin during epithelial-mesenchymal transformation induced by suspension in collagen gel. Using dispase and collagenase, we isolated adult thyroid follicles devoid of basal lamina and mesenchyme, and we suspended the follicles in 3D collagen gels. Cells bordering the follicle lumen retain epithelial polarity and thyroid phenotype, but basal cell surface organization is soon modified as a result of tissue multilayering and elongation of basal cells into the collagenous matrix. Cytodifferentiation, determined by thyroglobulin immunoreactivity, is lost as the basal epithelial cells move into the matrix after 3-4 days in collagen. By TEM, it can be seen that the elongating cells acquire pseudopodia, filopodia and mesenchyme-like nuclei and RER. Immunofluorescence examination of intermediate filaments showed that freshly isolated follicles and follicles cultured on planar substrata react only with anticytokeratin. However, all of the mesenchyme-like cells express vimentin and they gradually lose cytokeratin. These results suggest that vimentin may be necessary for cell functions associated with migration within a 3D matrix. The mesenchymal cells do not revert to epithelium when grown on planar substrata and the transformation of epithelium to mesenchyme-like cells does not occur within basement membrane gels. The results are relevant to our understanding of the initiation of epithelial-mesenchymal transformation in the embryo and the genetic mechanisms controlling cell shape, polarity and cytoskeletal phenotype.