The cyst form of Giardia lamblia is responsible for transmission of giardiasis, a common waterborne intestinal disease. In these studies, encystation of Giardia lamblia in vitro was demonstrated by morphologic, immunologic, and biochemical criteria. In the suckling mouse model, the jejunum was shown to be a major site of encystation of the parasite. Small intestinal factors were therefore tested as stimuli of encystation. An antiserum that reacted with cysts, but not with cultured trophozoites was raised in rabbits and used as a sensitive probe for differentiation in vitro. Cultured trophozoites that were exposed to bile salts showed a more than 20-fold increase in the number of oval, refractile cells that reacted strongly with anticyst antibodies, and in the expression of major cyst antigens. Exposure to primary bile salts resulted in higher levels of encystation than exposure to secondary bile salts. These studies will aid in understanding the differentiation of an important protozoan pathogen.