Retinoblastoma is recognized as a hereditary cancer. Genetic and epidemiological analysis of the disease has been incorporated into a two-hit mutational inactivation hypothesis of the origin of retinoblastoma. The molecular cloning and characterization of the retinoblastoma gene and gene product has allowed a critical testing of this two-hit hypothesis. All the predications of the model have been born out by experiment so far. These include inheritance of one mutated RB allele as the origin of hereditary retinoblastoma, subsequent loss of the remaining allele upon tumorigenesis, the involvement of the same RB gene in both sporadic and hereditary retinoblastoma, the somatic mutation of both RB alleles in sporadic retinoblastoma, the lack of RB expression in any retinoblastoma yet examined, and the recessiveness of mutated RB alleles. The RB gene exhibits functional properties consistent with its role as a suppressor of tumor formation. For example, re-expression of RB in tumor cells lacking endogenous RB leads to a loss of tumorigenic properties. RB protein can also inhibit progression through the cell division cycle, and it physically and/or functionally interacts with important cell cycle regulatory molecules. Although confirmation of the two-hit hypothesis seems complete, we can not rule out the possibility that other genes are involved in the genesis of this tumor. For example, there seems to be variable resistance to tumor development even in patients inheriting retinoblastoma susceptibility. Further, heterozygous RB null mice do not develop retinoblastoma, but develop a characteristic brain tumor instead. The molecular isolation of the RB gene is an important achievement in research on cancer. For the first time, it has become possible to examine, at the molecular level, genes that inhibit the growth of tumor cells. The precise mechanism of action of RB is unknown, but a broad outline is beginning to emerge. RB seems to negatively influence tumor cell growth by participating in regulation of the cell division cycle. RB has also been implicated in differentiation; its effect on the cell division cycle and its effects on differentiation may be different manifestations of the same function. Since RB is involved in oncogenesis, gene regulation, and cellular differentiation, it is obviously an attractive gene for intense study; understanding the function and mechanism of action of RB will impact the understanding of many, important cell processes.