We studied the transformation of epithelial, diploid cell lines (RL-33 and RL-34) derived from W rat liver by the Kirsten murine sarcoma virus. On days 4-5 after virus infection, the epithelial cells began to pile up focally, forming small projections and releasing round cells from the foci. The epithelial cells grew in chains or as islets and grew in suspension above the cells attached to the bottom of the flasks when the cultures reached the confluent stage. The virus titration pattern was "one-hit." Three classes of transformed cells were isolated with respect to virus release and antigen expression: 1) virus producer, 2) non-producer, and 3) sarcoma-positive, leukemia-negative cells. When transplanted sc into newborn rats, the transformed cells produced sarcomas. The transformed cells formed within 1-3 days larger aggregates than those of their normal counterpart cells when suspended in liquid growth medium above an agar base. Aggregate properties (size, viability, and proliferation) of transformed cells correlated with growth in soft agar and tumorigenicity. RNA-dependent DNA polymerase and type C virus particles were readily induced in the normal rat liver epithelial cells after exposure to 5-iodo-2'-deoxyuridine.