Differentiated rat thyroid epithelial cells, infected in vitro with a temperature-sensitive mutant of the Kirsten murine sarcoma virus, expressed at the permissive temperature (33 degrees C) some phenotypic properties typical of transformed cells, including morphological features, colony formation in agar, and induction of tumors in newborn animals. Specific functional markers of these differentiated cells, i.e., synthesis/secretion of thyroglobulin, synthesis of thyroglobulin mRNA and iodide uptake, were blocked during growth at 33 degrees C. Normal morphology, failure to grow in agar, and the requirement of hormones for optimal growth were all restored after shifting to the temperature nonpermissive for transformation (39 degrees C), though the typical differentiated functions remained blocked. Infection with a leukemia helper virus clone (Moloney or Kirsten murine leukemia virus) did not lead to the loss of the differentiated phenotype of rat epithelial thyroid cells, thus demonstrating that the loss of the differentiated phenotype is caused by the sarcoma virus component. These results indicate that the expression of some of the phenotypic properties of transformed differentiated rat thyroid epithelial cells is under the direct control of the p21 thermosensitive activity, whereas the block in the expression of two typical differentiation markers of thyroid epithelial cells is irreversible and probably controlled by different mechanisms.