The penis of adult rats comprises the corpus cavernosum penis and the proximal and distal segments of os penis which are situated proximal-distally in this order. Androgens are necessary for the phenotypic differentiation of these tissues. In the present study, genital tubercular mesenchyme of foetal rats was recombined with or without homologous or heterologous epithelia and transplanted beneath the kidney capsule of syngeneic adult male rats, and the development of the corpus cavernosum penis and the os penis in the transplants was examined. Only in the presence of epithelia can the genital tubercular mesenchyme acquire the capacity for differentiation into the corpus cavernosum penis, the proximal segment of os penis, and the distal segment of os penis in this chronological order. The inductive effect of epithelium is a permissive step in the differentiation of the os penis of rat. The epithelium seems to be necessary for the process of rudiment formation of the os penis and the corpus cavernosum penis.