ras proteins are localized to the plasma membrane where they are postulated to interact with growth factor receptors and other proximal elements in intracellular cascades triggered by growth factors. The molecular events associated with terminal differentiation of certain skeletal myoblasts are inhibited by specific polypeptide growth factors and by constitutive expression of transforming ras oncogenes. To determine whether the inhibitory effects of ras on myogenic differentiation were reversible and to investigate whether muscle-specific genes remained susceptible to ras-dependent repression in terminally differentiated myotubes, the murine myoblast cell line, C2, was transfected with a plasmid containing a mutationally activated human N-ras oncogene under transcriptional control of the steroid-sensitive promoter of the mouse mammary tumor virus long terminal repeat. Addition of dexamethasone to myoblasts bearing steroid-inducible ras oncogenes prevented myotube formation and induction of muscle creatine kinase and acetylcholine receptors. Inhibition of differentiation by dexamethasone occurred in a dose-dependent manner and was a titratable function of ras expression. In the presence of dexamethasone, myoblasts bearing steroid-inducible ras genes retained their dependence on exogenous growth factors to divide and exhibited contact inhibition of growth at confluent densities, indicating that the inhibitory effects of ras on differentiation were independent of cell proliferation. Removal of dexamethasone from N-ras-transfected myoblasts led to fusion and induction of muscle-specific gene products in a manner indistinguishable from control C2 cells. Examination of the effects of culture media conditioned by ras-transfected myoblasts on differentiation of normal C2 cells yielded no evidence for inhibition of differentiation via an autocrine mechanism. In contrast to the ability of N-ras to prevent up-regulation of muscle-specific gene products in myoblasts, induction of N-ras in terminally differentiated myotubes failed to extinguish muscle-specific gene expression. Together, these results suggest that oncogenic ras proteins reversibly activate an intracellular cascade that prevents establishment of the differentiated phenotype. The inability of ras to extinguish muscle-specific gene expression in terminally differentiated myotubes also suggests that ras may interfere with an early step in the pathway of myoblasts toward the differentiated state.