Neurogenic tumors were selectively induced in high incidence in F344 rats by a single transplacental exposure to the direct-acting alkylating agent N-ethyl-N-nitrosourea (EtNU). We prepared DNA for transfection of NIH 3T3 cells from primary glial tumors of the brain and from schwannomas of the cranial and spinal nerves that developed in the transplacentally exposed offspring between 20 and 40 weeks after birth. DNA preparations from 6 of 13 schwannomas, but not from normal liver, kidney, or intestine of tumor-bearing rats, transformed NIH 3T3 cells. NIH 3T3 clones transformed by schwannoma DNA contained rat repetitive DNA sequences, and all isolates contained rat neu oncogene sequences. One schwannoma yielded a transformant with rat-specific sequences for both neu and N-ras. A point mutation in the transmembrane region of the putative protein product of neu was identified in all six transformants and in the primary tumors from which they were derived as well as in 5 of 6 schwannomas tested that did not transform NIH 3T3 cells. Of 59 gliomas, only one yielded transforming DNA, and an activated N-ras oncogene was identified. The normal cellular neu sequence for the transmembrane region, but not the mutated sequence, was identified in DNA from all 11 gliomas surveyed by oligonucleotide hybridization. Activation of the neu oncogene, originally identified [Schechter, A.L., Stern, D.F., Vaidyanathan, L., Decker, S.J., Drebin, J.A., Greene, M.I. & Weinberg, R.A. (1984) Nature (London) 312, 513-516] in cultured cell lines derived from EtNU-induced neurogenic tumors that by biochemical but not histologic criteria were thought to originate in the central nervous system in BD-IX rats, appears specifically associated with tumors of the peripheral nervous system in the F344 inbred strain.