We have established a detailed framework for the process of shoot regeneration from Arabidopsis root and hypocotyl explants grown in vitro. Using transgenic plant lines in which the GUS or GFP genes were fused to promoters of developmental genes (WUS, CLV1, CLV3, STM, CUC1, PLT1, RCH1, QC25), or to promoters of genes encoding indicators of the auxin response (DR5) or transport (PIN1), cytokinin (CK) response (ARR5) or synthesis (IPT5), or mitotic activity (CYCB1), we showed that regenerated shoots originated directly or indirectly from the pericycle cells adjacent to xylem poles. In addition, shoot regeneration appeared to be partly similar to the formation of lateral root meristems (LRMs). During pre-culture on a 2, 4-dichlorophenoxyacetic acid (2, 4-D)-rich callus-inducing medium (CIM), xylem pericycle reactivation established outgrowths that were not true calli but had many characteristics of LRMs. Transfer to a CK-rich shoot-inducing medium (SIM) resulted in early LRM-like primordia changing to shoot meristems. Direct origin of shoots from the xylem pericycle occurred upon direct culture on CK-containing media without prior growth on CIM. Thus, it appeared that the xylem pericycle is more pluripotent than previously thought. This pluripotency was accompanied by the ability of pericycle derivatives to retain diploidy, even after several rounds of cell division. In contrast, the phloem pericycle did not display such developmental plasticity, and responded to CKs with only periclinal divisions. Such observations reinforce the view that the pericycle is an 'extended meristem' that comprises two types of cell populations. They also suggest that the founder cells for LRM initiation are not initially fully specified for this developmental pathway.