The mouse epidermal cell line 308 contains an activated Ha-ras gene and forms benign papillomas when transplanted to the skin of athymic nude mice. A radiation-associated malignant variant of this cell line, 308-10Gy5, has been isolated and shown to form squamous cell carcinomas in nude mice. To further examine the molecular events involved in malignant conversion of 308-10Gy5, we assessed the activator protein-1 (AP-1) binding and transactivating ability of 308 and 308-10Gy5. In nuclear protein extracts of 308, AP-1 sequence-specific binding to an oligonucleotide containing a single high-affinity AP-1 binding site was induced by the tumor promoter 12-O-tetradecanoylphorbol-13-acetate, as determined by gel shift analysis. Nuclear extracts of 308-10Gy5 bound to the AP-1 oligonucleotide without treatment with tumor promoters. Not only was sequence-specific AP-1 DNA binding constitutively active in malignant versus benign tumor cells, but so was transactivation of a unique AP-1-responsive chloramphenicol acetyltransferase reporter construct, pTiCTaK. Constitutive transactivation of this AP-1-responsive reporter construct was observed in the malignant but not the benign tumor cells. Furthermore, steady-state transcript levels of the tumor-associated AP-1-responsive genes stromelysin, urokinase-type plasminogen activator, c-jun, and c-fos were higher in malignant 308-10Gy5 cells than in benign 308 cells. These results suggest that acquisition of constitutive AP-1 DNA binding and transactivation can result in sustained deregulation of gene expression. While malignant progression in keratinocytes is probably not due solely to the acquisition of constitutive cellular AP-1 activity, the effect of deregulated expression of AP-1-regulated genes, especially basement membrane-degrading enzymes, may be functionally related to malignant conversion.