A bronchial xenograft model of the human airway was used to identify submucosal gland progenitor cells within the surface airway epithelium. Lineage analysis using recombinant retroviruses has demonstrated considerable diversity in the cellular composition of expanded clones within reconstituted xenograft airway epithelium. These findings provide evidence for the existence of multiple progenitors in the airway with either limited or pluripotent capacity for differentiation. Furthermore, the development of transgene-expressing submucosal glands was associated with a single subset of surface airway epithelial clones. This gland progenitor cell demonstrated two discernible characteristics consistent with the identification of an airway stem cell including: (1) pluripotent capacity for airway differentiation and (2) a two-fold higher proliferative rate than other observed clone types. The number of progenitor cells involved in gland development was also assessed by clonal analysis using alkaline phosphatase and beta-galactosidase transgenes. These studies demonstrated that more than one airway progenitor cell is involved in the initial stages of gland development. A second explanation for the high prevalence of non-clonality in developing glands was suggested from three-dimensional reconstruction of transgene marked glands. These reconstruction experiments demonstrated that 27% of glands contained more than one duct to the surface airway epithelium. This observation suggests a novel mechanism of gland morphogenesis by which independently formed glands interact to join glandular lumens. Such a mechanism of glandular development and morphogenesis may play an important role in normal submucosal gland development and/or the progression of hypersecretory diseases of the adult human airway as seen in cystic fibrosis, chronic bronchitis and asthma. The identification of progenitor cells with the capacity to form submucosal glands has implications on the targets for gene therapy in cystic fibrosis.