While a great deal of evidence has directly implicated the importance of O6-alkylation of guanine in the mutagenicity of alkylating agents, evidence demonstrating the oncogenic potential of this lesion has been largely indirect. We have combined a well-studied in vitro neoplastic transformation system (using C3H/10T1/2 mouse cells) with a proven method of gene transfection for expressing the bacterial O6-alkylguanine-DNA alkyltransferase (AT; EC 184.108.40.206) repair genes ada and ogt to generate subclones which possess augmented repair capability toward specific DNA lesions. The products of these genes specifically and differentially repair O6-methylguanine (O6-MeGua), O4-methylthymine (O4-MeThy), and methylphosphotriesters. We show that the level of expression of either the ada or the ogt AT gene in C3H/10T1/2 cells directly correlates with protection against mutation to ouabain resistance by N-methyl-N'-nitro-N-nitrosoguanidine (MNNG). Subclones expressing 70 fmol of AT per 10(6) cells exhibited a mutation frequency approximately 1/40th of that of clones expressing 15 fmol of AT per 10(6) cells when treated with MNNG at 0.4 micrograms/ml. Protection against mutagenesis by MNNG at 0.8 micrograms/ml, however, did not exceed 12-fold even in subclones expressing greater than 100 fmol of AT per 10(6) cells. As an MNNG dose of 0.6 micrograms/ml was sufficient to saturate more than 95% of the AT activity in any of the clones, the residual mutation frequency may have been caused by unrepaired O6MeGua lesions. In contrast to mutagenesis, protection against neoplastic transformation in vitro, in cells expressing high levels of AT, was most pronounced in cells treated with the highest dose of MNNG used (1.2 micrograms/ml). Low levels of transformation caused by MNNG at 0.4 and 0.8 micrograms/ml were not consistently inhibited in those clones. These data suggest that O6-MeGua formation is of major but not unique significance in the neoplastic transformation of C3H/10T1/2 cells by MNNG.