We have generated transgenic mice expressing the proto-oncogene c-fos from an H-2Kb class I MHC promoter as a tool to identify and isolate cell populations which are sensitive to altered levels of Fos protein. All homozygous H2-c-fosLTR mice develop osteosarcomas with a short latency period. This phenotype is specific for c-fos as transgenic mice expressing the fos- and jun-related genes, fosB and c-jun, from the same regulatory elements do not develop any pathology despite high expression in bone tissues. The c-fos transgene is not expressed during embryogenesis but is expressed after birth in bone tissues before the onset of tumor formation, specifically in putative preosteoblasts, bone- forming osteoblasts, osteocytes, as well as in osteoblastic cells present within the tumors. Primary and clonal cell lines established from c-fos-induced tumors expressed high levels of exogenous c-fos as well as the bone cell marker genes, type I collagen, alkaline phosphatase, and osteopontin/2ar. In contrast, osteocalcin/BGP expression was either low or absent. All cell lines were tumorigenic in vivo, some of which gave rise to osteosarcomas, expressing exogenous c- fos mRNA, and Fos protein in osteoblastic cells. Detailed analysis of one osteogenic cell line, P1, and several P1-derived clonal cell lines indicated that bone-forming osteoblastic cells were transformed by Fos. The regulation of osteocalcin/BGP and alkaline phosphatase gene expression by 1,25-dihydroxyvitamin D3 was abrogated in P1-derived clonal cells, whereas glucocorticoid responsiveness was unaltered. These results suggest that high levels of Fos perturb the normal growth control of osteoblastic cells and exert specific effects on the expression of the osteoblast phenotype.