Studies of the mutagenic action required for specific chemicals to produce benign or malignant tumours suggest that in mouse skin at least two genetic events occur before carcinoma formation. The isolation of an activated form of the c-rasH gene from skin papillomas has provided evidence that this gene may be a target for the first mutation, which could constitute the initiating mutation in skin carcinogenesis. In vitro studies indicate that the v-rasH gene of Harvey murine sarcoma virus (Ha-MSV), a replication-defective transforming retrovirus, could impart a conditional initiated phenotype on cultured keratinocytes by blocking their ability to differentiate terminally and arresting them in a late basal cell stage of maturation. We now show that when the Ha-MSV v-rasH gene is introduced into cultured keratinocytes by a defective retroviral vector, skin grafts constructed with cells carrying the mutated ras oncogene produce papillomas on athymic nude mouse recipients. Furthermore, the expression of the exogenous oncogene seems to be regulated at the transcriptional level in the differentiated portions of the benign tumour.