Primary cultures of BALB/c mouse embryo fibroblasts infected with as much as 100 PFU per cell of EHV-1 do not exhibit cytopathology or synthesize detectable amounts of EHV-1 specific RNA, DNA, or infectious virus. Addition of 1--2 microgram of non-fragmented EHV-1 DNA as a co-precipitate with calcium phosphate to monolayers of such non-permissive mouse cells resulted in the appearance, after 4--6 weeks, of foci of piled-up, morphologically altered cells. Cell lines established from such transformed foci exhibited a greatly increased growth rate, unlimited growth potential, aneuploid karyotype, and grew with colony formation in soft agar. Inoculation of 10(6) transformed cells into newborn syngeneic mice resulted in the formation of serially transplantable tumours (undifferentiated fibrosarcomas) with a 100% incidence within eight weeks. Infectious virus could not be rescued from the EHV-1 transformed or tumour-derived cell lines by growth in the presence of IUDR, by cocultivation with permissive horse cells, or by attempts to transfect permissive cells with transformed or tumour cell DNA. However, EHV-1 specific membrane antigens were detected in the transformed cells by immunofluorescence with hyperimmune anti-EHV-1 mouse serum, and the presence of a fragment of the EHV-1 genome was demonstrated in both the transformed and tumour cells. These results indicate that cells nonpermissive for replication of EHV-1 remain susceptible to neoplastic transformation by the EHV-1 genome.