Vanadate has been shown to inhibit phosphatases that remove phosphate groups from phosphotyrosine in cell-free systems. Addition of vanadate to the culture medium of NRK-1 cells resulted in a maximal 40-fold increase in the level of phosphotyrosine in cell protein. Also, vanadate induced transformation as evidenced by four criteria: generation of a highly refractile morphology, decreased density-dependent growth inhibition, increased rates of uptake of 2-deoxyglucose, and growth in the absence of a solid support. The effects were dose-dependent and reversible, and similar effects were seen in two other cell lines and in secondary mouse embryo fibroblasts. Vanadate did not appear to induce increased rates of phosphatidylinositol turnover in exponentially growing transformed cells.