The cellular interactions regulating the production of collagenase by a cell line derived from a spontaneously arising rat mammary carcinoma have been studied. The cell line, BC1, was grown permanently under defined serum-free conditions, so that the poorly characterized and variable effects of serum on collagenase expression were avoided. Two stable subpopulations of cells present in BC1 cultures were defined as epithelioid cells ("E-cells") and myoepithelioid cells ("M-cells"). These subpopulations differed in their morphology, pattern of growth and susceptibility to detachment from culture vessels by trypsin. Seven clones of M-cells and 7 clones of E-cells, obtained by the limiting dilution technique, were used to determine the cellular source of collagenase and the interactions which led to its expression. M-cells displayed an absolute dependence on a soluble factor produced by E-cells for their survival in vitro. The presence of both cellular types in culture was necessary for collagenase secretion to occur, E-cells being the major source of enzyme in mixed cultures. A soluble factor produced by M-cells was largely, if not completely, responsible for the induction of collagenase secretion by E-cells. Clones representative of both subpopulations were tumorigenic in syngeneic host animals. These results suggest that the phenotypic diversity which occurs within populations of neoplastic cells may give rise to subpopulations of cells which display a more aggressive phenotype in coexistence than in isolation.