Histogenesis of thyroid follicles in the chick embryo begins with a penetration by cells of the mesenchymal capsule into a solid epithelial primordium. Before penetration occurs, slits containing fibrillar material form between the epithelial cells. The fibrillar material is an epithelial cell product as shown by its formation within channels that form in cultures of isolated epithelial primordia. The drugs L- azetidine-2-carboxylic acid (LACA) and alpha, alpha'-dipyridyl, which interfere with collagen synthesis, prevent the formation of fibrils in cultured epithelial primordia and in cultures of whole thyroids. Furthermore, mesenchymal cells do not invade when whole thyroid primordia are cultured in the presence of either drug. The effects of alpha, alpha'-dipyridyl are reversed by washing out the drug; the effects of LACA are reversed by incubation with equimolar or greater amounts of L-proline added to the medium along with the drug. The results are interpreted to mean that the fibrillar material is collagen of epithelial origin, that the collagen in some way plays a role in mesenchymal penetration of the epithelial primordium, and that the epithelium is responsible for the pattern of lobulation within the developing gland.