An avian retrovirus containing only the v-mil oncogene (PA200-MH2) was analyzed for its ability to induce a transformed phenotype in chicken embryo fibroblasts. Infected cultures exhibited an altered morphology, disarranged actin cable filaments, and a decrease in the amount of cell surface fibronectin. In addition, these cells showed a high level of plasminogen activator protease activity and were also capable of growth in low serum concentrations. In contrast, PA200-MH2 was very inefficient at inducing foci under agar and colonies in semisolid medium relative to the Mill Hill 2 and Rous sarcoma viruses. This inefficiency was further reflected in vivo by the total inability of PA200-MH2 to induce wing tumors in young birds. However, 40% of the birds inoculated in the wing web with PA200-MH2-infected cells did develop slow-growing tumors at the site of injection, with no evidence of hematopoietic involvement. Our results indicate that the v-mil oncogene is transforming both in vitro and in vivo and that each of the oncogenes in the Mill Hill 2 virus, v-mil and v-myc, can independently transform fibroblasts. These data suggest that v-mil is functionally related to its homologous murine counterpart, v-raf, which also transforms fibroblasts.