To determine whether N-methyl-N-nitrosourea (MNU) can induce malignant transformation of human fibroblasts and whether O6-methylguanine (O6-MeG) is involved, two populations of infinite life span cell strain MISU-1.1, differing only in level of O6-alkylguanine-DNA alkyltransferase, were treated with MNU and assayed for focus formation. MNU caused a dose-dependent increase in the frequency of foci in both groups, but the dose required was significantly lower in the cells lacking O6-alkylguanine-DNA alkyltransferase, indicating that O6-MeG was causally involved. Of 35 independent focus-derived strains assayed for p53 transactivating abilily, one was heterozygous, and 15 had lost all activity, 1 of 7 from untreated cells and 14 of 27 from MNU-treated cells. These results indicate that loss of p53 is not required for focus formation but may permit cells to form foci. Of 35 strains assayed for tumorigenicity, 10 formed malignant tumors with a short latency, all 10 lacked wild-type p53. The p53 heterozygous strain also formed tumors after a long latency, and the cells from those tumors lacked p53 transactivating ability. None of the 19 strains with wild-type p53 formed tumors. These results indicate that although loss of p53 is not sufficient for malignant transformation of MSU-1.1 cells, it may be necessary. Analysis of the p53 cDNA from several focus-derived strains lacking p53 activity revealed that each contained the same mutation, an A to G transition at codon 215, resulting in a change from serine to glycine. Because p53 can be inactivated by mutations at any one of a large number of sites, finding the same mutation in each strain assayed strongly suggests that the target population included a subpopulation of cells with this codon 215 mutation in one allele. Further analysis showed that all 15 focus-derived cells strains that lacked p53 transactivating activity contained two alleles, each with the same codon 215 mutation, and that the mutant allele in the heterozygous strain also had that mutatation. Analysis of the p arm of chromosome 17 of the focus-derived cell strains containing the codon 215 mutation revealed seven patterns of loss of heterozygosity, evidence of mitotic homologous recombination. Similar analysis of a separate series of cell strains, derived from foci induced by cobalt-60, revealed four patterns of loss of heterozygosity, only two of which had been found with those induced by MNU. These data suggest that homologous mitotic recombination, induced by O6-MeG in a subpopulation of cells heterozygous for p53 mutation, rendered the cells homozygous for loss of p53 activity, that this allowed the cells to form foci, and that although loss of p53 is not sufficient for malignant transformation, it predisposes cells to acquire the additional changes needed for such transformation.