Gadd34 (also known as MyD116) was originally described as a growth arrest and DNA damage-inducible gene. Increased expression of Gadd34 was subsequently found to correlate with apoptosis, and forced overexpression of the protein leads to apoptosis. Gadd34 protein modulates protein phosphatase type 1 activity through both direct binding to the protein, as well as through binding to other proteins that also modulate phosphatase activity. In addition, Gadd34 has a region of homology with the herpes simplex virus type 1 ICP34.5 protein that is involved in the prevention of apoptosis in infected cells. Recently it was reported that a novel rat Gadd34-related gene, PEG-3, was upregulated in transformed cells, and that forced expression of this gene led to increased tumorigenic potential of cells implanted into nude mice and increased angiogenesis of these tumors. We have found, however, that PEG-3 does not exist in normal rat cells, which have a single diploid complement of Gadd34. Sequence analysis of the rat Gadd34 gene and comparison with PEG-3 indicates that PEG-3 is most likely a mutant of Gadd34 that perhaps arose as a result of transformation. This finding suggests that truncated Gadd34 may interfere with normal Gadd34 function in transfected cells. However, human Gadd34 lacking the viral homology domain does not interfere with normal Gadd34-induced apoptosis in cultured cells. This suggests that viral similarity sequences may be required for Gadd34-mediated functions other than apoptosis.