We have examined the pattern of differentiation of the small intestinal epithelium in fetal rats during the 17th through 21st days of gestation. Five genes expressed in late fetal, neonatal, and adult enterocytes were used as markers of differentiation. They encode three homologous small cytoplasmic hydrophobic ligand binding proteins--liver fatty acid binding protein (L-FABP), intestinal fatty acid binding protein (I-FABP), and cellular retinol binding protein II (CRBP II)--and two apolipoproteins--apoAI and apoAIV. RNA blot hybridization studies indicated that gradients in mRNA concentration from the proximal small intestine to colon appear coincident with the initiation of rapid epithelial cell proliferation and villus formation (days 17-19 of the 22-day gestation period). Immunocytochemical studies disclosed a remarkably heterogeneous pattern of cell-specific expression of the three hydrophobic ligand binding proteins that was not apparent with either apoAIV or apoAI. This "mosaic" staining pattern was observed in morphologically similar cells occupying identical topographic positions along nascent villi in 17- to 18-day fetuses. The onset and resolution of this mosaicism varies between I-FABP, L-FABP, and CRBP II in the proximal small bowel, although it completely resolves by the first postnatal day. The distal small intestine exhibits a developmental delay of 1-2 days in the appearance of this heterogeneous pattern of initial gene expression. Double-label immunofluorescent analyses using L-FABP and I-FABP antibodies indicated that on the 18th day of gestation the proximal small intestinal columnar epithelium contains several populations of enterocytes expressing neither, one, or both proteins. The potential significance of this mosaic pattern of intestinal epithelial differentiation is discussed in light of recent studies with transgenic and chimeric mice.