Hepatocyte-directed production of urokinase-type plasminogen activator (uPA) in transgenic mice is hepatotoxic. Infrequently, hepatocytes arise that do not express uPA, due to physical loss of transgene DNA, and these cells clonally repopulate the entire liver within 3 months of birth. Surprisingly, hepatic tumors appear in these mice beginning at 8 months of age despite the fact that uPA is not oncogenic or genotoxic. Analysis of the transgene locus reveals that tumors arise only from a particular subclass of transgene-deficient cells in which the entire transgene array, and possibly a significant amount of flanking DNA, is deleted. Considering that all transgene-deficient regenerative nodules undergo extensive replication but only a subset gives rise to tumors, we propose that loss of genomic DNA, not mitogenesis per se, is a primary carcinogenic determinant in this model of hepatocarcinogenesis.