Alterations affecting the epidermal growth factor (EGF)/transforming growth factor alpha (TGF alpha)-responsive mitogenic pathway are frequently detected in malignancies. In particular, the EGF-receptor (EGFR) molecule has been found overexpressed in a number of human tumors, and TGF alpha is produced by a large array of tumor cells. Gene transfer experiments have previously demonstrated that expression of either TGF alpha or EGFR alone is not sufficient to induce the transformed phenotype in NIH3T3 cells. In this study we sought to investigate the biological effect of expression of TGF alpha and high levels of EGFR in this model system. We demonstrate that the gene for TGF alpha acts as a potent oncogene in NIH3T3 cells overexpressing EGFR (NIH-EGFR, greater than 10(6) EGFR). We further show that TGF alpha directly stimulates proliferation of the cell in which it is produced and provide evidence that the extracellular compartment of the transformed cell is the major site of interaction between TGF alpha and EGFR. Analysis of human tumor cell lines revealed a strong correlation between expression of TGF alpha and overexpression of EGFR. Moreover, high levels of EGF-independent tyrosine phosphorylation of the EGFR were detected both in NIH-EGFR expressing TGF alpha and in high EGFR and TGF alpha coexpressing human tumor cell lines. Thus, the two events instituting the EGFR/TGF alpha autocrine loop responsible for transformation in vitro may play a role in the development of some human malignancies.