The dystroglycan complex is a transmembrane linkage between the cytoskeleton and the basement membrane in muscle. One of the components of the complex, alpha-dystroglycan binds both laminin of muscle (laminin-2) and agrin of muscle basement membranes. Dystroglycan has been detected in nonmuscle tissues as well, but the physiological role in nonmuscle tissues has remained unknown. Here we show that dystroglycan during mouse development in nonmuscle tissues is expressed in epithelium. In situ hybridization revealed strong expression of dystroglycan mRNA in all studied epithelial sheets, but not in endothelium or mesenchyme. Conversion of mesenchyme to epithelium occurs during kidney development, and the embryonic kidney was used to study the role of alpha-dystroglycan for epithelial differentiation. During in vitro culture of the metanephric mesenchyme, the first morphological signs of epithelial differentiation can be seen on day two. Northern blots revealed a clear increase in dystroglycan mRNA on day two of in vitro development. A similar increase of expression on day two was previously shown for laminin alpha 1 chain. Immunofluorescence showed that dystroglycan is strictly located on the basal side of developing kidney epithelial cells. Monoclonal antibodies known to block binding of alpha-dystroglycan to laminin-1 perturbed development of epithelium in kidney organ culture, whereas control antibodies did not do so. We suggest that the dystroglycan complex acts as a receptor for basement membrane components during epithelial morphogenesis. It is likely that this involves binding of alpha-dystroglycan to E3 fragment of laminin-1.