A three-dimensional corneal tissue construct was used to examine the effect of culture environment and endothelial cell interaction on epithelial differentiation and basement membrane assembly. Rabbit corneal epithelial cells were cultured over rabbit stromal fibroblasts in a collagen matrix with or without an underlying layer of immortalized mouse corneal endothelial cells (Muragaki, Shiota, Inoue, Ooshima, Olsen, and Ninomiya. (1992) Eur. J. Biochem. 207, 895-902). The cultures were grown submerged or at a dry or moist interface. Basement membrane, anchoring fibril, and hemidesmosome assembly was monitored using transmission electron microscopy as well as indirect immunofluorescence microscopy of laminin, type VII collagen, and alpha 6 integrin. Antibodies against keratin 3 (K3) and alpha-enolase marked differentiated and undifferentiated corneal epithelial cells, respectively. When all three cell types were cultured at a moist interface, hemidesmosomes, anchoring fibrils, and a continuous basement membrane were observed 2 wk after lifting the cultures to an air-liquid interface (air-lift). The distribution of alpha-enolase and K3 was identical to patterns seen in the limbal region of the cornea. Air-lifted tissue constructs lacking the endothelial cell layer showed only limited distribution of laminin and type VII collagen at the epithelial-matrix junction. alpha 6 Integrin was present along the entire plasma membrane of the basal cells; epithelial differentiation was not complete as alpha-enolase was seen in basal and two to three layers of suprabasal cells. Submerged cultures without endothelial cells did not express differentiation markers or basement membrane components. These data indicate that endothelial cell interaction dramatically enhances the amount and quality of epithelial basement membrane assembly and that epithelial differentiation is influenced by the type of interface between tissue, liquid, and air.