Human diploid keratinocytes may be divided into three clonal types with differing capacities for proliferation. The paraclone, which has the shortest life span, is limited to 15 divisions, after which all the cells undergo programmed terminal differentiation. By means of a retroviral vector, paraclones which have not completed their life span and which consist of not more than a few hundred cells can be transduced at a high frequency with DNA complementary to the 12S transcript of the adenovirus early region 1A gene. Transformation can be detected within a single cultivation by the formation of progressively growing colonies. The transformants appear to have an unlimited growth potential, and they form a disorganized epidermis when they are grafted as an epithelium onto athymic mice. These experiments clearly show that, in order to be transformed by a viral oncogene, the target cell need not be a stem cell.