The embryonic avian corneal epithelium in vitro responds to extracellular matrix (ECM) molecules in either soluble or polymerized form by flattening its basal surface, organizing the basal cortical actin cytoskeleton, and stepping up its production of corneal stroma twofold. Embryonic corneal epithelia, like hepatocytes and mammary gland cells, seem to contain heparan sulfate proteoglycan (HSPG) in their plasmalemma, which may interact with actin on the one hand or underlying collagen on the other. Work on the corneal epithelium suggests that, in addition to HSPG, specific glycoprotein receptors for laminin and collagen exist in the basal plasmalemma and play the critical role in actually organizing the basal epithelial cytoskeleton. As yet, uncharacterized proteins may link such receptors to actin. We suggest that ECM-dependent organization of the cytoskeleton is responsible for ECM enhancement of corneal epithelial differentiation. Cell shape and exogenous ECM also affect mesenchymal cell differentiation. In the case of the corneal fibroblast migrating in collagen gels, an actin cortex present around the elongate cell seems to interact with myosin in the cytosol to bring about pseudopodial extension. Both microtubules and actin microfilaments are involved in fibroblast elongation in collagen gels. It follows from the rules presented in this review that the mesenchymal cell surface is quite different from the epithelial cell surface in its organization. Nevertheless, epithelial cell surface-ECM interaction can be modified in the embryo at particular times to permit predesignated epithelial-mesenchymal transformations, as for example at the primitive streak. Though basal surfaces of definitive, nonmalignant epithelia adhere rather strictly to the rules of epithelium-ECM interaction and do not invade underlying ECM, the environment can be manipulated in vitro to cause these epithelia to send out pseudopodia and give rise aberrantly to mesenchymal cells in collagen gels. Further study of this phenomenon should cast light on the manner in which epithelial and mesenchymal cells organize receptors for matrix molecules on their cell surfaces and develop appropriate cytoskeletal responses to the extracellular matrix.