Multiple benign squamous papillomas commonly precede the development of an occasional squamous cell carcinoma in mouse skin carcinogenesis. The incidence of carcinomas can be enhanced by treating papilloma-bearing mice with mutagens such as urethane, nitroquinoline-N-oxide, or cisplatinum. This observation suggests that a genetic change is required for malignant conversion. The malignant phenotype is characterized by a marked reduction in the transcription of specific epidermal differentiation markers, a pattern which is useful for the early diagnosis of malignant conversion. Cells expressing a benign phenotype can be obtained by introducing the v-rasHa oncogene into cultured epidermal cells by a replication-defective retrovirus. Alternatively, benign tumor cells can be cultured from papillomas induced by chemical carcinogens in vivo or from carcinogen-treated mouse epidermis. In all cases, the benign phenotype in vitro is characterized by an altered biological response to changes in extracellular calcium, an important determinant of the differentiation state of cultured normal keratinocytes. Transfection of cloned plasmid DNA into benign tumor cells has revealed that transforming constructs of the fos oncogene induce malignant conversion, whereas myc and adenovirus E1A oncogenes do not. The fos carcinomas do not express differentiation-specific epidermal markers and secrete proteases such as transin and urokinase, a set of characteristics previously noted for chemically induced skin carcinomas. Cultured normal epidermal cells, exposed to the v-ras and the v-fos oncogenes simultaneously, are malignantly transformed. Alone, the fos oncogene does not detectably alter the phenotype of normal keratinocytes. These studies indicate that a limited number of genes is involved in epidermal carcinogenesis.