A fetal rat hepatocyte culture system has been used to study the molecular mechanisms of tyrosine aminotransferase (TAT) gene expression during development. It has previously been shown that TAT activity can be detected in 19-d, but not 15-d, gestation hepatocytes on the first day of culture (Yeoh, G.C.T., F.A. Bennett, and I.T. Oliver. 1979. Biochem. J. 180:153-160). In this study enzyme activity, synthesis, and mRNA levels were determined in hepatocytes isolated from 13-, 15-, and 19-d gestation rats maintained in culture for 1, 2, or 3 d and exposed to dexamethasone. TAT expression is barely detectable in 13-d gestation hepatocytes even after 3 d in culture. Hepatocytes isolated from 15-d gestation fetuses have undetectable levels of enzyme activity and synthesis on the first day of culture; both can be assayed by days 2 and 3. TAT mRNA levels in these hepatocytes, measured by hybridization with a specific cDNA, increase substantially during culture. TAT activity, synthesis, and mRNA are evident on the first and subsequent days of culture in 19-d gestation hepatocytes. Transcription measurements in isolated nuclei indicate that the increase in TAT mRNA in 15- and 19-d gestation hepatocytes is associated with an increase in transcription of the gene. Immunocytochemical studies demonstrated that the increase in TAT expression correlated with an increase in the proportion of hepatocytes expressing the enzyme, rather than a simultaneous increase in all hepatocytes. These results support the proposal that a subpopulation of 15-d fetal hepatocytes undergo differentiation in culture with respect to TAT.