We have continued to utilize experimental hepatocarcinogenesis in the rat as a model to study the mechanism of neoplastic development with particular emphasis on defining the possible role of a set of oncogenes that are commonly associated with the process of hepatocarcinogenesis in vivo. Previous results had consistently shown up-regulation of the expression of myc and raf oncogenes during chemical hepatocarcinogenesis. In order to examine the transforming potential of these and other oncogenes in the liver system we have established an in vitro transformation system consisting of a retroviral vector containing relevant oncogenes and rat liver-derived epithelial (RLE) cell line as the reporter cell. The main findings include: (1) v-raf, H-v-ras and a combination of v-raf and v-myc are potent transforming agents in the RLE cells. (2) Different tumor types were observed following transplantation of the infected cells. The most undifferentiated tumors originated from the v-raf-infected cells whereas transformation with v-raf/f- myc combination resulted in hepatocellular carcinoma. (3) Transformation of RLE cells with v-raf and v-H-ras resulted in increased expression of the MDR-I gene and the development of multidrug resistance. (4) We have established that transforming growth factor-beta-1 (TGF-beta-1) is capable of differentiating the RLE cells towards the adult hepatocyte phenotype. Furthermore, transformation of the RLE cells block the TGF-beta induced differentiation of these cells.