The response to hormones is studied in an epithelium as it forms in culture. Epithelia formed by A6 cells do not respond to vasopressin when grown in a petri dish. When grown on a millipore filter bottom cup, the epithelia respond to vasopressin. There is a close correlation between the development of vasopressin sensitive adenylate cyclase, transepithelial resistance, and formation of a morphologically ordered peithelium. Incubation with dexamethasone accelerates differentiation. In differentiated epithelia, the rate of sodium transport is inhibited by activators of protein kinase C. The inhibition is at the apical entry step for sodium.