Corneal epithelial stem cells (SCs) are an ideal model for investigating how adult lineage-committed epithelial SCs are regulated by an anatomically defined and accessible niche, that is, limbal palisades of Vogt, located between the cornea and the conjunctiva. We have used collagenase digestion to isolate the entire limbal epithelial SCs and subjacent mesenchymal cells, and we have demonstrated that their close association is crucial for promoting epithelial clonal growth, implying that the latter serves as niche cells (NCs). After their close association was disrupted by trypsin/EDTA, single SCs and NCs could reunite to generate sphere growth in three-dimensional Matrigel in the embryonic SC medium, and that such sphere growth initiated by SC-NC reunion was mediated by SDF-1 uniquely expressed by limbal epithelial progenitor cells and its receptor CXCR4, but not CXCR7, strongly expressed by limbal stromal NCs. Inhibition of CXCR4 by AMD3100 or a blocking antibody to CXCR4 but not CXCR7 disrupted their reunion and yielded separate spheres with a reduced size, while resultant epithelial spheres exhibited more corneal differentiation and a notable loss of holoclones. For the first time, these results provide strong evidence supporting that limbal SC function depends on close physical association with their native NCs via SDF-1/CXCR4 signaling. This novel in vitro model of sphere growth with NCs can be used for investigating how limbal SC self-renewal and fate decision might be regulated in the limbal niche. STEM CELLS 2011;29:1874-1885