Mouse skin carcinomas arise from a small subpopulation of benign papillomas with an increased risk of malignant conversion. These papillomas arise with limited stimulation by tumor promoters, appear rapidly, and do not regress, suggesting that they differ in growth properties from the majority of benign tumors. The transforming growth factor .3 proteins are expressed in the epidermis and are growth inhibitors for mouse keratinocytes in vitro; altered TGF-18 expression could influence the growth properties of high-risk papillomas. Normal epidermis, tumor promotertreated epidermis, and skin papillomas at low risk for malignant conversion express TGF-.81 in the basal cell compartment and TGF-,82 in the suprabasal strata. In low-risk tumors, 90% ofthe proliferating cells are confined to the basal compartment.In contrast, the majority of high-risk papillomas are devoid of both TGF-,B1 and TGF-f82 as soon as they arise; these tumors have up to 40% of the proliferating cells in the suprabasal layers. Squamous cell carcinomas are also devoid of TGF-3, suggesting that they arise from the TGF--deflcient high-risk papillomas. In some high-risk papillomas, TGF-(31 loss can occur first and correlates with basal cell hyperproliferation, while TGF-,32 loss correlates with suprabasal hyperproliferation. Similarly, TGF-(31-null transgenic mice, which express wild-type levels of TGF-182 in epidernds but no TGF-131 in the basal layer, have a hyperproliferative basal cell layer without suprabasal proliferation. In tumors, loss ofTGF-I is controlled at the posttranscriptional level and is associated with expression of keratin 13, a documented marker of malignant progression. These results show that TGF-.3 expression and function are compartmentafized in epidermis and epidermal tumors and that loss of TGF-(8 is an early, biologically relevant risk factor for malignant progression.In multistage chemical carcinogenesis of the mouse epidermis, malignant conversion of a benign papilloma to a squamous cell carcinoma is a rare event (1). While most papillomas and carcinomas generated by initiation with 7,12-dimethylbenz[a]anthracene (DMBA) have an A --T mutation at codon 61 of the Ha-ras allele (2, 3), there is evidence for subpopulations of papillomas with distinct risks for malignant conversion. Standard protocols utilizing DMBA initiation and continuous promotion with phorbol 12-myristate 13-acetate (PMA) produce a large number of papillomas, the majority of which arise after 10 weeks and have a malignant conversion frequency of 3-5% (4). Many of these tumors are promoter-dependent and regress rapidly when PMA treatment is terminated (5). In contrast, DMBA initiation followed by 5 weeks of PMA promotion, or continuous promotion with the weak promoter mezerein, yields fewer papillomas, which arise within 6-8 weeks, do not regress in the absence of promotion, and have a conversion frequency of 15-25% (4). This suggests that most carcinomas arise from a small population of papillomas that have relatively autonomous growth properti...