The recent discovery, that a vaccinia virus (VV) gene encodes a polypeptide with structural homology to transforming growth factor (TGF-alpha) and epidermal growth factor (EGF), led us to look for a virus-induced protein with the predicted biological activity. The supernatant of VV infected cells cultures were found to contain an acid stable Mr 25,000 polypeptide which competes with EGF for binding to EGF membrane receptors. This vaccinia virus-induced growth factor (VGF) like EGF and TGF-alpha is mitogenic and stimulates anchorage independent cell growth in the presence of TGF-beta. However, VGF did not cross-react in a radioimmunoassay specific for small and large forms of TGF-alpha and exhibited minimal cross-reactivity with antisera to EGF. VGF was detectable in the culture medium within 2 hr and maximal amounts were present 12 hr after infection. The level of VGF was proportional to the multiplicity of VV used. Inhibition of viral DNA synthesis enhanced VGF production, consistent with the hypothesis that VGF is an early gene product encoded by VV. The demonstration of a novel growth factor, that is released from cells infected with vaccinia virus, may have important implications regarding virus-host interactions. In order to determine the nature of these interactions, a VV mutant that does not produce VGF was isolated and is being studied.