A complex network of interactions between the stroma, the extracellular matrix and the epithelium drives mammary gland development and function. Two main assumptions in chemical carcinogenesis of the mammary gland have been that carcinogens induce neoplasia by causing mutations in the DNA of the epithelial cells and that the alterations of tissue architecture observed in neoplasms are a consequence of this primary mutational event. Here, we use a rat mammary tissue recombination model and the chemical carcinogen N-nitrosomethylurea (NMU) to determine whether the primary target of the carcinogen is the epithelium, the stroma or both tissue compartments. Mammary epithelial cells were exposed in vitro either to the carcinogen or vehicle before being transplanted into the cleared fat pads of rats exposed to carcinogen or vehicle. We observed that neoplastic transformation of these mammary epithelial cells occurred only when the stroma was exposed in vivo to NMU, regardless of whether or not the epithelial cells were exposed to the carcinogen. Mammary epithelial cells exposed in vitro to the carcinogen formed phenotypically normal ducts when injected into a non-treated stroma. Mutation in the Ha-ras-1 gene did not correlate with initiation of neoplasia. Not only was it often found in both cleared mammary fat pads of vehicle-treated animals and intact mammary glands of untreated animals, but it was also absent in some tumors. Our results suggest that the stroma is a crucial target of the carcinogen and that mutation in the Ha-ras-1 gene is neither necessary nor sufficient for tumor initiation.