Spontaneously immortalized human skin keratinocytes (HaCaT) were transfected with the c-Ha-ras (EJ) oncogene via a plasmid construct which also contained the selectable neomycin gene. Clones were selected on the basis of G418 resistance. Those clones that had stable integrants of Ha-ras fell into 3 classes with respect to tumorigenicity. Class I clones were nontumorigenic, i.e., formed nodules which rapidly regressed. This phenotype is identical to that seen with parental HaCaT cells. Class II clones formed slowly growing, highly differentiated cystic or papillomatous-type benign tumors, and class III clones formed highly differentiated, locally invasive squamous cell carcinomas. The clones of all three classes exhibited similar morphology and growth potential in culture and retained the ability to reconstitute an epidermis-like stratified epithelium in transplantation experiments. Only the malignant clones showed locally invasive growth. Both the benign and the malignant clones exhibited higher levels of ras integration and variable levels of mutated p21 protein product. Thus, expression of the cellular Ha-ras oncogene in these human epithelial cells significantly altered growth regulation, resulting in varying degrees of growth potential in vivo, ranging from benign to malignant tumors. However, no direct correlation was seen between high levels of p21 expression and malignant growth.