A peptide secreted by some tumor cells in vitro imparts anchorage-independent growth to normal rat kidney (NRK) cells and has been termed transforming growth factor type alpha (TGF-alpha). To directly investigate the transforming properties of this factor, the human sequence coding for TGF-alpha was placed under the control of either a metallothionein promoter or a retroviral long terminal repeat. These constructs failed to induce morphological transformation upon transfection of NIH 3T3 cells, whereas viral oncogenes encoding a truncated form of its cognate receptor, the EGF receptor, or another growth factor, sis/platelet-derived growth factor 2, efficiently induced transformed foci. When NIH 3T3 clonal sublines were selected by transfection of TGF-alpha expression vectors in the presence of a dominant selectable marker, they were shown to secrete large amounts of TGF-alpha into the medium, to have downregulated EGF receptors, and to be inhibited in growth by TGF-alpha monoclonal antibody. These results indicated that secreted TGF-alpha interacts with its receptor at a cell surface location. Single cell-derived TGF-alpha-expressing sublines grew to high saturation density in culture. However, when plated as single cells on contact-inhibited monolayers of NIH 3T3 cells, they failed to form colonies, whereas v-sis- and v-erbB-transfected cells formed transformed colonies under the same conditions. Moreover, TGF-alpha-expressing sublines were not tumorigenic in nude mice. These and other results imply that TGF-alpha exerts a growth-promoting effect on the entire NIH 3T3 cell population after secretion into the medium but little, if any, effect on the individual cell synthesizing this factor. It is concluded that the normal coding sequence for TGF-alpha is not a direct-acting oncogene when overexpressed in NIH 3T3 cells.