A realistic model for the free rho meson with coupling to two-pion sta
tes is employed to calculate the rho propagator in a hot and dense had
ron gas. The medium modifications are based on hadronic rescattering p
rocesses: intermediate two-pion states are renormalized through intera
ctions with surrounding nucleons and deltas, and rho meson scattering
is considered off nucleons, deltas, pions and kaons. Constraints from
gauge invariance as well as the full off-shell dynamics of the interac
tions are accounted for. Within the vector dominance model we apply th
e resulting in-medium rho spectral function to compute e(+)e(-) produc
tion rates from pi(+)pi(-) annihilation. The calculation of correspond
ing e(+)e(-) spectra as recently measured in central collisions of hea
vy-ions at CERN/SpS energies gives reasonable agreement with the exper
imental data. (C) 1997 Elsevier Science B.V.