The product of the Rous sarcoma virus (RSV) oncogene, V-src, is a phosphoprotein, pp60src, which has tyrosine-specific kinase activity and is responsible for RSV transformation. We have examined the effects of v-src following transfection of normal, diploid and preneoplastic Syrian hamster embryo (SHE) cells with RSV DNA, containing the v-src gene. Normal SHE cells transfected with RSV DNA formed tumors with a low frequency (2 tumors out of 10 sites) and after a long latency period (14 weeks) when treated cells were injected into nude mice. In contrast, three different preneoplastic immortal SHE cell lines were highly susceptible to transformation by the v-src oncogene to the neoplastic phenotype. Tumors formed with a high efficiency and a short latency period (less than 3 weeks). NeoR clones isolated after cotransfection of SHE cells with pSV2-neo and RSV DNAs did not show any evidence of v-src gene expression. These results indicate that the v-src oncogene was primarily responsible for neoplastic transformation of SHE cells but additional changes were required. To determine if neoplastic transformation by v-src DNA in normal cells is initially suppressed, neoR clones isolated after cotransfection of pSV2-neo and RSV DNAs into an immortalized cell line, 1OW, were examined. Analyses of these clones indicate that RSV sequences are not expressed initially. The mechanism of v-src transformation was compared to the mechanism of transformation of another viral oncogene, v-Ha-ras. Cell lines containing either the v-src gene or the v-Ha-ras gene were analyzed following treatment with retinoic acid. Anchorage-independent growth of cells expressing v-src was inhibited by retinoic acid, whereas anchorage-independent growth of cells expressing v-Ha-ras was stimulated. These results indicate that retinoic acid may be a useful probe for distinguishing between different mechanisms of transformation by these two viral oncogenes.