In this report, we utilize rat intestinal cell (IEC-18) clones expressing an activated human H-ras gene to investigate the relationship between malignant transformation and growth control by transforming growth factor beta (TGF-beta). We demonstrate that clones expressing high levels of H-ras oncogene lose sensitivity to the growth inhibitory action of TGF-beta. The loss of sensitivity is related to the degree of H-ras expression and is shown to be a direct consequence of H-ras expression through the use of a clonal cell line with inducible expression of activated H-ras. Co-incident with the loss of growth inhibition, ras-expressing clones display an altered expression of TGF-beta-binding proteins as detectable by [125I]TGF-beta cross-linking. While IEC-18 cells express type II (92 kDa) binding protein predominantly, H-ras expression induces a shift to predominantly type I (69 kDa) binding protein expression.