alpha-1-Antitrypsin (AAT) is the major antiprotease in human plasma; it is synthesized primarily in hepatocytes and to a lesser extent in several nonhepatic tissues. Under the control of regulatory elements of the human AAT gene, expression of SV40-large tumor antigen (T-ag) in transgenic mice occurred in the liver, stomach, pancreas, and kidney. Among seven founder transgenic animals, six developed liver carcinoma, four showed gastric neoplasia, and one developed pancreatic carcinoma. In three animals the kidneys showed glomerular or tubular epithelial hyperplasia but no malignancy. A stable transgenic line, 1812, was established. Members of this line reproducibly develop liver tumors by 10 weeks of age but do not exhibit any phenotypic changes in other tissues. Histological changes leading to liver tumor formation occurred with predictable kinetics and could be classified into four distinct stages: (a) embryonal/fetal stage, no recognizable histological changes; (b) newborn to 2 weeks of age, hyperplastic hepatocytes with reduced amounts of cytoplasm but no nuclear alterations; (c) between 3 and 8 weeks of age, diffuse liver cell dysplasia without observable tumor nodules; and (d) 8 weeks of age and thereafter, hepatocellular carcinomas in a background of liver dysplasia. Embryonic and newborn liver tissue showed uniform, high level expression of T-ag in the majority of hepatocytes by immunohistochemistry, whereas the dysplastic and tumoral stages were characterized by considerable variation in both the intensity of T-ag staining and the proportion of T-ag-positive cells. Immunoprecipitation analyses showed that T-ag was complexed with cellular protein p53 in all tumor samples. This study showed that SV40 T-ag expression in the liver resulted in cellular hyperplasia and dysplasia; additional event(s) apparently were required for progression to neoplasia. Those cooperating events occurred with predictable kinetics. This transgenic mouse system displays several similarities with human liver disease and provides a practical model for the study of separate steps in hepatocarcinogenesis.