The epithelial cell strain NAL1A cultured from normal adult mouse lung has been transformed by culturing in dexamethasone into an invasive neoplastic cell strain. The criteria for neoplastic transformation include the capacity for anchorage independent growth in soft agar as well as the formation of invasive neoplastic nodules after subcutaneous transplantation in thymectomized irradiated newborn mice. The cells of the invasive neoplastic nodules induced by dexamethasone culturing of NAL1A were indistinguishable histopathologically and by electron microscopy from invasive nodules evoked by the subcutaneous inoculation of CMT64, a cell line cultured from a metastasizing mouse lung tumour and cell strain NUL1 derived from mouse pulmonary adenomata induced by urethane. Cells of the nodules derived from all three cultured strains possessed desmosomes, surface microvilli and phospholipid lamellar bodies characteristic of the type 2 pneumocyte. It is concluded that cultured cell strains NAL1A, cultured in dexamethasone, NUL1 and CMT64 evoke invasive subcutaneous neoplasms derived from a common ancestor, presumably a type 2 pneumocyte related stem cell.