Growth factor independence is a hallmark of malignancy that is attributed to the development of autocrine growth factor loops in cancer cells. However, growth factor-dependent normal cells also exhibit autocrine activity, thus raising the issue of how endogenously produced activity in cancer cells differs in a manner that leads to growth factor independence. We have examined this issue by comparing growth factor-independent HCT116 human colon carcinoma cells with a growth factor-dependent subcompartment of malignant cells designated HCT116b that was isolated from the same patient tumor. Therefore, the development of the growth factor-independent phenotype represents clonal progression within the tumor in vivo. The growth factor independence of HCT116 cells was shown to be dependent on autocrine transforming growth factor (TGF)-alpha activity, yet the isoparental HCT116b subcompartment showed similar levels of TGF-alpha expression as HCT116 when cells were in exponential growth. When both cell lines were growth arrested by nutrient deprivation, HCT116b cells required nutrient replenishment and growth factors for reinitiation of DNA synthesis, whereas HCT116 cells required only nutrient replenishment. In contrast to growth factor-dependent HCT116b cells, the HCT116 cells showed up-regulation of TGF-alpha expression during growth arrest as a result of enhanced transcription. This increased TGF-alpha expression in quiescent HCT116 cells was associated with constitutive epidermal growth factor receptor (EGFR) activation in the growth-arrested state, whereas growth-arrested HCT116b cells did not show EGFR activation. TGF-alpha antisense transfection of HCT116 cells showed that EGFR activation was due to increased TGF-alpha expression. Pretreatment of growth-arrested HCT116 cells with AG1478, a selective inhibitor of EGFR tyrosine kinase activity, blocked the reinitiation of DNA synthesis, demonstrating that growth factor independence was due to the increased TGF-alpha expression and EGFR activation of these cells in growth arrest relative to growth factor-dependent HCT116b cells. Importantly, the level of EGFR activation in growth-arrested HCT116 cells was only slightly higher than that of exponential cells, indicating that it was inappropriate EGFR activation in growth arrest rather than the amplitude of activation that generated growth factor independence.