In the classical skin model of tumor initiation, keratinocytes treated once with carcinogen retain their normal appearance and growth behavior indefinitely unless promoted to growth into papillomas. Because many of the papillomas regress and may recur with further promotion, their cells can also be considered as initiated. The growth of initiated keratinocytes can be inhibited either in vitro or in vivo by close association with an excess of normal keratinocytes, but it is enhanced by dermal fibroblasts. Chick embryo fibroblasts (CEF) in culture produce transformed foci after infection with Rous sarcoma virus (RSV) on a background of normal CEF in a medium containing 10% or less calf serum (CS), but they retain normal appearance and growth regulation in 10% fetal bovine serum (FBS) or 20% CS. Transformation of a carcinogen-treated line of mouse embryo fibroblasts is prevented, and can be reversed, in high concentrations of FBS in the presence of an excess of normal cells. FBS has high, broad-spectrum antiprotease activity. Increased protease production occurs in a variety of transformed cells and is correlated with progression in tumors. Protease treatment stimulates DNA synthesis and mitosis in confluent, contact-inhibited normal cell cultures. Synthetic inhibitors of proteases suppress transformation in carcinogen-treated cultures and inhibit tumor formation in animals. Several different classes of protease may be overexpressed in the same transformed cells. It is proposed that excessive protease production accounts for major features of neoplastic transformation of initiated cells, but that transformation can be held in check by protease inhibitors present in serum and released from surrounding cells. It would be informative to determine whether high concentrations of FBS would inhibit the neoplastic development of initiated keratinocytes.