Inactivation of DNA-mismatch repair underlies the genesis of microsatellite unstable (MSI) colon cancers. hPMS2 is one of several genes encoding components of the DNA-mismatch repair complex, and germline hPMS2 mutations have been found in a few kindreds with hereditary nonpolyposis colorectal carcinoma (HNPCC), in whom hereditary MSI colon cancers develop. However, mice bearing null hPMS2 genes do not develop colon cancers and hPMS2 mutations in sporadic human colon cancers have not been described. Here we report that in Vaco481 colon cancer the hPMS2 gene is inactivated by somatic mutations of both hPMS2 alleles. The cell line derived from this tumor is functionally deficient in DNA mismatch repair. This deficiency can be biochemically complemented by addition of a purified hMLH1-hPMS2 (hMutLalpha) complex. The hPMS2 deficient Vaco481 cancer cell line demonstrates microsatellite instability, an elevated HPRT gene mutation rate, and resistance to the cytotoxicity of the alkylator MNNG. We conclude that somatic inactivation of hPMS2 can play a role in development of sporadic MSI colon cancer expressing the full range of cancer phenotypes associated with inactivation of the mismatch repair system.