The transforming gene of avian sarcoma virus UR2, v-ros, encodes a receptor-like protein tyrosine kinase and differs from its proto-oncogene, c-ros, in its 5' truncation and fusion to viral gag, a three-amino-acid (aa) insertion in the transmembrane (TM) domain, and changes in the carboxyl region. To explore the basis for activation of the c-ros transforming potential, various c-ros retroviral vectors containing those changes were constructed and studied for their biological and biochemical properties. Ufcros codes for the full-length c-ros protein of 2,311 aa, Uppcros has 1,661-aa internal deletion in the extracellular domain, CCros contains the 3' c-ros cDNA fused 150 aa upstream of the TM domain to the UR2 gag, CVros is the same as CCros except that the 3' region is replaced by that of v-ros, and VCros is the same as CCros except that the 5' region is replaced by that of v-ros. The Ufcros, Uppcros, CCros, and CVros are inactive in transforming chicken embryo fibroblasts, whereas VCros is as potent as UR2 in cell-transforming and tumorigenic activities. Upon passages of CCros and CVros viruses, the additional extracellular sequence in comparison with that of v-ros was delected; concurrently, both viruses (named CC5d and CV5d, respectively) attained moderate transforming activity, albeit significantly lower than that of UR2 or VCros. The native c-ros protein has a very low protein tyrosine kinase activity, whereas the ppcros protein is constitutively activated in kinase activity. The inability of CCros and CVros to transform chicken embryo fibroblasts is consistent with the inefficient membrane association, instability, and low kinase activity of their encoded proteins. The CC5d and CV5d proteins are indistinguishable in kinase activity, membrane association, and stability from the v-ros protein. The reduced transforming potency of CC5d and CV5d proteins can be attributed only to their differential substrate interaction, notably the failure to phosphorylate a 88-kDa protein. We conclude that the 5' rather than the 3' modification of c-ros is essential for its oncogenic activation; the sequence upstream of the TM domain has a negative effect on the transforming activity of CCros and CVros and needs to be deleted to activate their biological activity.