(FORTUNE Magazine) – One of the dullest stops on a fashion editor's calendar is a men's wear trade show known as MAGIC, the Men's Apparel Guild in California. Somehow, balding men hawking pleated khakis and argyle socks don't have quite the appeal of Claudia Schiffer sashaying down a Paris runway. But this year, in a sign that something major is rumbling through the staid business of men's wear, at least part of the MAGIC show in Las Vegas was rocking. In prime real estate just a stone's throw from the designer collections, in the so-called Streetwear section, record-scratching DJs blared rap, break dancers spun on the floors, a guy in the Red Spike booth drilled tattoos onto the biceps of willing passersby, and bespectacled young men rocked on their heels chanting street poetry. So crowded were the aisles that it felt like a New York subway car at rush hour.

What stood out above all were the faces in the crowd: African Americans dominated the place. And they weren't simply visitors. This year, for the first time, clothing companies with a strong black identity occupied much of the best real estate at the MAGIC show.

The attention given these firms at MAGIC is indicative of something far bigger. Across the country, black--or, in fashion-speak, "urban"--clothing companies are expanding beyond the major cities and touching the farthest reaches of American suburbia. Of course, urban clothes--baggy pants by Mecca, football jerseys by FUBU--have been hot for years, but thus far the market has been small, limited mainly to African-American buyers. Now the clothes have hit the mainstream in a big way. Everywhere these days white kids want to dress like black kids.

The trend has not gone unnoticed by the nation's biggest retailers. While urban apparel lines have heretofore been restricted mainly to specialty shops like Mr. Rags and Uncle Ralph's Urban Gear, they're now being picked up by department stores and major chains. This broad distribution means that urban wear is finally hitting the big leagues, stealing customers from traditional young men's brands like Levi's, Ralph Lauren, and Tommy Hilfiger.

Consider FUBU's expansion. The nation's largest urban-clothing company, FUBU is owned by Daymond John, a 29-year-old African American who grew up in Hollis, a working-class neighborhood in Queens, N.Y. The FUBU line is classic urban wear: $115 shiny satin baseball jackets with enormous logos, $67 baggy jeans accessorized with loops and oversized pockets, $98 big fleece tops in brash colors. FUBU stands for For Us By Us, yet according to John, 40% of his sales already go to white boys. Expect that figure to go higher--much higher. Until recently FUBU was carried at only 60-odd Macy's outlets, stores in large urban areas, but now FUBU is available at 112 Macy's stores nationwide. As Kit Devereux, the Federated Department Stores executive who brought FUBU and other urban lines into Macy's and Bloomingdale's, puts it: "We don't really see it as a black thing." Which is why J.C. Penney, too, has expanded the number of stores that carry FUBU from 50 to more than 300. "We're finding [the line] has very wide appeal," says a Penney executive.

A few months ago Pacific Sunwear, a mall chain of 342 stores that appeal to white skater and surfer kids, launched a new chain called d.e.m.o. The stores are devoted to urban clothing but are located in suburban malls that cater to the kind of customer who has never ridden a subway. Timothy Harmon, PacSun's president, says demand for urban apparel is so high that he expects there will eventually be as many d.e.m.o. stores as there are Pacific Sunwear stores. "D.e.m.o is not an urban play," he insists. "It's a suburban play for kids who have adopted an urban lifestyle."

Nothing better exemplifies white kids' adoption of urban lifestyle than sales of rap music. Like urban-clothing lines, rap music used to sell mainly to African Americans. But now, according to a recent SoundScan study, an estimated two-thirds of rap sales are to whites. Last year sales of rap hit $1.4 billion, 10% of all albums sold, making it music's fastest-growing category--a category that's rapidly encroaching on country music's spot as the second-most-popular American music after rock.

As rap sales have taken off, so has the influence of rappers on fashion. As any self-respecting fan knows, Canibus wears Pure Playaz. Jay-Z wears Phat Farm. Dr. Dre prefers Karl Kani. The influence these men have on the wardrobes of American teenagers is unprecedented. Sure, disco and designer jeans went hand in hand, but who can remember what brand the Bee Gees wore? The fact is, urban clothing is hot not because it's designed by African Americans ("Style has no color," one inner-city consumer explained), nor even because of its revolutionary design ("Our camp shirt is no different than anyone else's," admitted an urban-apparel executive). Urbanwear companies have ridden in on the coattails--and jacket backs, and baseball caps, and shoes--of rap musicians.

In 1990 there were fewer than five urban booths at the MAGIC show. Last August there were at least 140. Mecca USA's owner, Amit Shah, says he has doubled his business every year for the past three and expects to do some $50 million in wholesale this year. Pelle Pelle has gone from $8 million at wholesale to $45 million in five years. FUBU says it did $75 million in 1997, $200 million in 1998, and expects to do $350 million next year. Even newcomer Sean John--better known as rapper and producer Sean "Puffy" Combs or Puff Daddy--has presold more than $15 million of his new clothing line for next year.

Indeed, as clothing companies make big money on the backs of rap artists, entrepreneurial rappers have gotten to thinking that they should get into the apparel business themselves. Oli "Power" Grant, 27, was one of the first to move from music to clothes. The executive producer of the rap group Wu-Tang Clan, Grant started making clothes in the early 1990s, with little success. ("I'm a black kid from the projects," he explains. "People didn't take it too seriously.") But then, in 1995, a Wu-Tang Clan album went platinum. Suddenly the manufacturers that earlier wouldn't extend Power credit saw the potential: A million fans had bought Wu-Tang's album, so now even if only 10% of them bought a $20 shirt ... You get the idea. Power has opened four Wu Wear stores, and his line is carried in Macy's, Rich's, and d.e.m.o, among others; he says he'll do $10 million at wholesale this year.

Power's success has inspired others to follow suit. Puff Daddy realized that if designers like Karl Kani could make millions by dressing him, he could make millions by dressing his fans. So last August the 29-year-old Puff was at MAGIC to promote his new clothing line. Also at MAGIC was Percy Miller, a.k.a. Master P, producer of gangsta rappers like Silkk the Shocker and Snoop Dogg. Master P's clothing line is named after his record company, No Limit. The rap group Boyz II Men, whose line, Groove, is now carried by Nordstrom, was at MAGIC too.

No one keeps track of how big the urban-apparel market is. But with $6.8 billion in sales in the first nine months of this year, clothing for men ages 18 to 29 makes up 18% of the men's clothing market, according to NPD, an apparel research firm. More and more, sales to this age group are driven by streetwear--a category that includes brands like JNCO (known for superwide-legged jeans) and Stussy (favored by California surfer dudes) but that is increasingly dominated by the urban-wear lines. So it's not surprising that white clothing companies are doing all they can to go urban: Ralph Lauren, Donna Karan, Calvin Klein, and Tommy Hilfiger have all launched jeans lines in part to cater to the urban customer. Ralph Lauren's Polo Jeans recently lured away a designer from rap impresario Russell Simmons' clothing line, Phat Farm.

Last year Gap tried to get urban credibility by using rapper LL Cool J in a TV spot for Gap Easy Fit Jeans. In the commercial, Cool J is wearing Gap jeans--and a FUBU hat. Listen closely and you'll hear him rap, "The Gap is for us, by us." That's a play for street cred if ever there was one. At his spring 1999 Gucci show in Milan, designer Tom Ford showed men in cargo pants strutting to the tune of "Gucci Guy," a rap song commissioned for the event. Perry Ellis is sponsoring the premiere of an independent film called Slam about young black men in Washington, D.C.

Of course, now the question is, Can an urban line reap success in Wichita without turning off Watts? Is FUBU's street image undermined if a nerdy white kid in Oklahoma wears the brand? "There's a give-and-take between financial success and fashion success," notes Susan Silverstein, an apparel analyst at NationsBanc Montgomery Securities. "When you go mainstream, you're not cutting edge; you run the risk of losing your inner core of followers." But most urban entrepreneurs feel confident they can strike the balance. "My clothes are not about marketing to hip-hoppers," declares Puff Daddy. "They're about marketing to Generation X, whether they're white, black, Irish, or Latino."

Reaching a broader audience is just one part of the equation; there's concern among some in the industry that urban-wear entrepreneurs are brilliant marketers but crummy businessmen. After all, this isn't the first time urban firms have tried to go mainstream. Carl Jones, an African-American entrepreneur, launched a company called Cross Colours in 1989, featuring clothes emblazoned with political statements LIKE PEACE N THE HOOD. By 1993 it had $160 million in wholesale sales. Jones became a media darling, an extraordinary success--and a legendary failure when he went belly-up as his biggest retail customer, Merry-Go-Round, filed for Chapter 11 bankruptcy.

Do today's urban firms have more staying power? Retailers criticize FUBU, for one, as arrogant, disorganized, and overextended. "They're chaos at best," said a retailer who asked not to be identified. Meanwhile PacSun's Harmon worries that prices of many urban lines are too high to reach a broad market.

There are indications that today's urban-wear firms have learned from the Cross Colours fiasco. Jones is back in the business with a company called Jones Juke Joint and a new line called Juke Style. The first time around, Jones did everything himself: He designed the clothes, he sourced manufacturers, he took care of distribution. Now he knows better. Last spring he struck a deal with the founders of Tag Rag, a $30-million-a-year surfwear company, who have promised to invest some $5 million in Jones Juke Joint in exchange for two-thirds of equity. Tag Rag will take care of the firm's less glamorous side, areas like manufacturing and distribution. Explains Raphael Sabbah, a Tag Rag partner: "Carl will just design." Agreements like this are becoming commonplace. Established apparel firms like Fila USA, Supreme International, and G-III Apparel Group have all signed deals with urban-wear entrepreneurs. There are even rumors that Levi Strauss & Co. is considering hooking up with an urban-wear firm.

Still, many urban entrepreneurs are determined to go it alone. Newcomer Master P has already proven he has entrepreneurial talents (he started No Limit Records and owns an Athlete's Foot and a Tennaco franchise), so he's confident he can figure out the clothing business on his own. Says P defiantly: "I know my community, and I know I have the type of clothes my community wants to wear--I don't need nobody to tell me how to do that."

The truth is, the urban market is so closely linked to rap music that the survival of Master P's clothing line could well have to do more with the popularity of his label's rap artists than with how well he manages. The bottom line: As long as the future of rap is bright, so is the future of urban clothing. As Wu Wear's chief operating officer, Michael Clark, puts it: "We can go for as long as the music is strong."