The ultimate stage of carcinogenesis in both human and mouse epithelial cells is the ability to invade surrounding tissues and metastasize to distant sites. In mouse skin tumours, the development of the invasive, spindle cell phenotype is associated with an imbalance of alleles on mouse chromosome 7, including the H-ras gene. In previous work, we have described clonally related squamous and spindle cell lines from the same primary tumour which differed substantially in morphology and behaviour, but showed the same series of mutations in H-ras and p53 genes. One of the events which takes place during this transition is disruption of cell-cell contacts, possibly due to the induced expression of metalloproteinases such as stromelysin-1 and disappearance of the cell adhesion molecule E-cadherin. Parallel studies using somatic cell hybrids have shown that the spindle cell phenotype is recessive in hybrids between squamous and spindle cells. We propose that an important epidermal differentiation-controlling gene is lost during the spindle cell transition.