Investigations were carried out designed to isolate and biologically characterize the subpopulation of cells within the Syrian hamster embryo (SHE) cell population which are sensitive to morphological transformation (MT). Biological cloning of MT-sensitive cells demonstrated that within the complex SHE cell population, MT-sensitive cells comprise approximately 27% of the clonally plateable cellular population. Importantly, MT-sensitive cells display MT rates of approximately 7% following benzo[a]pyrene exposure, a rate which falls to <1% with additional passage of the cells, indicating that the ability to undergo MT is a transient phenomenon. Biological characterization of the clonal MT-sensitive cells indicates that these cells are relatively undifferentiated, since they express both cytokeratins and vimentin and respond to a variety of stem cell growth and differentiation factors, although the majority appear to be committed progenitor cells, since they express either mesenchymal or epithelial cell characteristics. Together these data demonstrate that MT-sensitive cells comprise a subpopulation of the cells within the complex SHE cell population, that the ability to undergo MT is a transient phenomenon and that MT-sensitive cells are relatively undifferentiated committed progenitor stem-like cells, all of which gives rise to the hypothesis that MT is an alteration in the cellular differentiation state.