Amplification or overexpression or both of either the c-myc or the human neu (C-erbB-2) gene are common events in many primary human tumors. Coamplification or overexpression or both of both genes have been reported in some breast cancers. The possibility of cooperation between the c-myc and the normal rat neu (c-neu) genes in transforming cells was examined. Surprisingly, the expression of c-myc in B104-1-1 cells, and activated rat neu oncogene (neu*)-transformed NIH 3T3 line, resulted in morphologic reversion. This reversion was found to be a consequence of a transcription-repressive action of c-myc on the neu gene via a 140-bp fragment on the neu gene promoter. The effective concentration of a positive factor(s) interacting with this fragment seemed to be lowered by the expression of c-myc. Our findings lend support to arguments concerning the long-suspected function of c-myc as a transcriptional modulator. They also imply that an oncogene such as c-myc, or possibly the rapidly explored class that encodes transcription factors, under certain conditions may act to reverse a transformed phenotype that is induced by another oncogene instead of contributing positively towards the transformation process. Therefore, the activity of an oncogene may depend on the environment in which it is expressed. In addition, we may have identified the neu gene as a cellular target gene of negative regulation by c-myc.