Cell hybrids between normal, early-passage Syrian hamster embryo cells and a highly tumorigenic, chemically transformed hamster cell line, BP6T, were formed, selected, and analyzed. Tumorigenicity and anchorage-independent growth were suppressed in the hybrid cells compared to the tumorigenic BP6T cells. These two phenotypes segregated coordinately in these cells. To determine at what stage in the neoplastic process this tumor-suppressive function was lost, two chemically induced immortal cell lines were examined at different passages for the ability to suppress the tumorigenic phenotype of BP6T cells following hybridization. Hybrids of BP6T cells with the immortal, nontumorigenic cell lines at early passages were suppressed for tumorigenicity and anchorage-independent growth. This tumor-suppressive ability was reduced in the same cells at later passages and in some cases nearly completely lost, prior to the neoplastic transformation of the immortal cell lines. Subclones of the cell lines were heterogeneous in their ability to suppress tumorigenicity in cell hybrids; some clones retained the tumor-suppressive ability and others lost this function. The susceptibility to neoplastic transformation of these cells following DNA transfection with the viral ras oncogene or BP6T DNA inversely correlated with the tumor-suppressive ability of the cells. These results suggest that chemically induced neoplastic progression of Syrian hamster embryo cells involves at least three steps: induction of immortality, activation of a transforming oncogene, and loss of a tumor-suppressive function.