The mouse intestinal epithelium represents a unique mammalian system for examining the relationship between cell division, commitment, and differentiation. Proliferation and differentiation are rapid, perpetual, and spatially well-organized processes that occur along the crypt-to-villus axis and involve clearly defined cell lineages derived from a common multipotent stem cell located near the base of each crypt. Nucleotides -1178 to +28 of the rat intestinal fatty acid binding protein gene were used to establish three pedigrees of transgenic mice that expressed SV-40 large T antigen (TAg) in epithelial cells situated in the uppermost portion of small intestinal crypts and in already committed, differentiating enterocytes as they exited these crypts and migrated up the villus. T antigen production was associated with increases in crypt cell proliferation but had no apparent effect on commitment to differentiate along enterocytic, enteroendocrine, or Paneth cell lineages. Single- and multilabel-immunocytochemical studies plus RNA blot hybridization analyses suggested that the differentiation programs of these lineages were similar in transgenic mice and their normal littermates. This included enterocytes which, based on the pattern of [3H]thymidine and 5-bromo-2'-deoxyuridine labeling and proliferating nuclear antigen expression, had re-entered the cell cycle during their migration up the villus. The state of cellular differentiation and/or TAg production appeared to affect the nature of the cell cycle; analysis of the ratio of S-phase to M-phase cells (collected by metaphase arrest with vincristine) and of the intensities of labeling of nuclei by [3H]thymidine indicated that the duration of S phase was longer in differentiating, villus-associated enterocytes than in the less well-differentiated crypt epithelial cell population and that there may be a block at the G2/M boundary. Sustained increases in crypt and villus epithelial cell proliferation over a 9-mo period were not associated with the development of gut neoplasms-suggesting that tumorigenesis in the intestine may require that the initiated cell have many of the properties of the gut stem cell including functional anchorage.