Latent membrane protein 1 (LMP1) encoded by the Epstein-Barr virus (EBV) genome is known to induce loss of contact inhibition and the anchorage-independent growth in rodent fibroblasts and increased expression of cell-surface activation markers and cell adhesion molecules in human B lymphocytes. To analyze the role of LMP1 in tumorigenicity, we prepared BALB/c 3T3 clones (B3LP) expressing LMP1. These B3LP cells showed non-transformed phenotypes in vitro which were characterized by normal cell morphology, contact inhibition in growth and anchorage-dependent growth. The activity of NF-kappa B induced generally in several cell lines after transfer of the LMP1 gene was not detected in B3LP cells. However, B3LP expressing LMP1 at moderate levels lost sensitivity to growth arrest by transforming growth factor-beta 1 (TGF-beta 1) and formed tumors in severe combined immune deficiency mice. Cells expressing the truncated form of LMP1 and expressing LMP1 at low level were sensitive to TGF-beta 1-mediated growth arrest and did not form tumors in mice. Therefore, cells expressing LMP1 at moderate but not at low levels formed tumors in mice and lost sensitivity to TGF-beta 1. Our results suggest that loss of TGF-beta 1-mediated growth inhibition is an important event for the tumorigenicity of LMP1-expressing cells.