The activated ras oncogene that is present in Harvey sarcoma virus is able to induce malignant transformation of pure cultures of mouse primary keratinocytes. Malignant transformation of these cells is demonstrated by their ability to form carcinomas when grafted back onto syngeneic animals. However, expression of the malignant phenotype by the ras-transformed keratinocytes is drastically inhibited by the presence of normal dermal fibroblasts. This inhibitory effect depends on the ratio of fibroblasts to keratinocytes. It can be observed with mitomycin C-treated growth-arrested dermal fibroblasts and not with other cells, such as normal keratinocytes or established fibroblasts. Thus, a cellular environment approximating normal tissue can suppress tumor formation triggered by a single oncogene.