Conditional oncogene expression in transgenic mice is of interest for studying the oncoprotein requirements during tumorigenesis and for deriving cell lines that can be induced to undergo growth arrest and enhance their differentiated functions. We utilized the bacterial tetracycline (Tet)-resistance operon regulatory system (tet) from Tn10 of Escherichia coli to control simian virus 40 (SV40) large tumor (T) antigen (TAg) gene expression and to generate conditionally transformed pancreatic beta cells in transgenic mice. A fusion protein containing the tet repressor (tetR) and the activating domain of the herpes simplex virus protein VP16, which converts the repressor into a transcription activator, was produced in beta cells of transgenic mice under control of the insulin promoter. In a separate lineage of transgenic mice, the TAg gene was introduced under control of a tandem array of tet operator sequences and a minimal promoter, which by itself is not sufficient for gene expression. Mice from the two lineages were then crossed to generate double-transgenic mice. Expression of the tetR fusion protein in beta cells activated TAg transcription, resulting in the development of beta-cell tumors. Tumors arising in the absence of Tet were cultured to derive a stable beta-cell line. Cell incubation in the presence of Tet led to inhibition of proliferation, as shown by decreased BrdUrd and [3H]thymidine incorporation. The Tet derivative anhydrotetracycline showed a 100-fold stronger inhibition compared with Tet. When administered in vivo, Tet efficiently inhibited beta-cell proliferation. These findings indicate that transformed beta cells selected for growth during a tumorigenesis process in vivo maintain a dependence on the continuous presence of the TAg oncoprotein for their proliferation. This system provides an approach for generation of beta-cell lines for cell therapy of diabetes as well as conditionally transformed cell lines from other cell types of interest.