Carcinogenesis in mouse skin can be divided into three distinct stages: initiation, promotion, and progression (malignant conversion). Initiation, induced by a single exposure to a genotoxic carcinogen, can result from a mutation in a single critical gene (e.g., rasHa), apparently in only a few epidermal cells. The change is irreversible. Promotion, resulting in the development of numerous benign tumors (papillomas), is accomplished by the repeated application of a nonmutagenic tumor promoter. The effects of single applications of tumor promoters are reversible since papillomas do not develop after insufficient exposure of initiated skin to promoters or when the interval between individual promoter applications is increased sufficiently. The reversibility of promotion suggests an epigenetic mechanism. Promoter treatment provides an environment that allows the selective clonal expansion of foci of initiated cells. The conversion of squamous papillomas to carcinomas (termed progression or malignant conversion) occurs spontaneously at a low frequency. The rate of progression to malignancy can be significantly increased by treatment of papilloma-bearing mice with certain genotoxic agents. These progressor agents or converting agents are likely to act via a second genetic change in papillomas already bearing the initiating mutation. Progression in the skin is characterized by genetic changes that result in several distinct changes in the levels or activity of structural proteins, growth factors, and proteases. The mechanisms involved in progression are being studied in epidermal cell culture. In order to determine the in vivo phenotype of cultured cells, a grafting system was developed in which the cells were transferred from culture to a prepared skin bed in athymic mice. Introduction of an activated v-fos oncogene into initiated cells bearing an activated rasHa gene produced cells with a carcinoma phenotype, i.e., carcinomas formed when the cells were grafted as part of reconstituted skin. Grafted keratinocytes containing the rasHa gene alone produced papillomas; with v-fos alone, normal skin formed when grafted. The rasHa/fos carcinomas showed changes in differentiation markers characteristic of chemically induced carcinomas. A cell culture assay utilizing cells initiated by the introduction of an activated rasHa oncogene was developed to study progression. After exposure of initiated cells to progressor agents under conditions in which the proliferation of the rasHa-initiated cells was suppressed, proliferating foci developed, with a good correlation of activity in the assay with activity in the progression stage in vivo. The cell culture assay provides a quantitative model to study chemically induced neoplastic progression and may be useful to identify potential progressor agents.