The origin of yolk sac carcinoma obtained from rat embryos transplanted to extrauterine sites was traced to the extraembryonic portion of 9-day egg-cylinders. Under appropriate conditions cells of the extraembryonic portion of the egg cylinder differentiate into cells of parietal yolk sac epithelium, continue to proliferate and form retransplantable malignant tumors. Serum concentrations of alpha-fetoprotein were elevated in rats bearing yolk sac carcinomas and in some animals bearing teratomas admixed with yolk sac carcinoma. Possible factors that regulate the survival and proliferation of yolk sac epithelium in extrauterine sites are briefly discussed.