The transcription factor Egr-1, stimulates the activity of a number of genes and inhibits other genes, by binding to the sequence GCGGGGGCG in 5' enhancer regions. However, the functions of Egr-1 are obscure in spite of its rather ubiquitous expression. Egr-1 may play a role in proliferation in mitogen-stimulated cells but its expression is also correlated with the differentiated state in teratocarcinoma cells. The constitutive expression of Egr-1 appears to have little effect on the growth rate of normal immortalized cell-lines. We show that in NIH3T3 cells that are conditionally transformed by the expression of v-six, the presence of Egr-1 is inhibitory to the production of transformed colonies (foci) and to growth in soft agar. In addition, the first appearance of tumors in nu/nu mice is delayed in tumorigenicity tests with cells that over-express Egr-1 and tumor growth is suppressed compared to control cells. We used a series of fragments of Egr-1 cloned into expression vectors to show that not only full length, but also truncated Egr-1 fragments inhibit colony formation. Using deletion mutants, we observed that this inhibitory activity is dependent on the presence of the DNA-binding 'zinc-finger' region. Wilm's tumor protein, WT1, (known to be a tumor suppressor gene) that exhibits the same DNA binding activity is also inhibitory. In contrast, colony formation is stimulated by an Egr-1 antisense RNA-expressing plasmid, since colonies grow rapidly and the colony-forming frequency is higher than in the presence of v-sis alone. We conclude that proteins containing the Egr-1 'zinc-finger' domain can bind to the regulatory regions of one or more genes that are required for the transformation of fibroblasts by v-sis thus inhibiting transformation. One function for Egr-1 implied by these results is the restraint of transformed growth in mitogen-stimulated cells.