In this report, we investigated the transforming properties of retinoic acid receptor beta (RARbeta). The v-erbA protein, which is the viral oncogenic homologue of the thyroid hormone receptor, was replaced by either the complete RARbeta (betaR) or a hepatitis B virus pre-S-RARbeta (HbetaR) hybrid product in an avian erythroblastosis virus-based vector. In chicken hematopoietic cells, the HbetaR protein was able to transform erythroid progenitor cells, whereas no such transformation was observed with the wild-type betaR protein. Moreover, the fully transformed phenotype was observed even in the absence of v-erbB, and HbetaR-transformed erythroid cells grew independently of growth factors and transforming growth factor alpha. The analysis of erythrocytic-specific proteins revealed that the transformed cells were blocked at the colony-forming unit-erythroid stage and that the expression of the carbonic anhydrase II gene, a gene normally regulated by thyroid hormones, was repressed by the HbetaR protein. Finally, hepatocarcinomas rapidly developed in some chickens infected in ovo with viruses encoding either the normal or the hybrid HbetaR, suggesting that an inappropriate expression of the RARbeta gene may represent an important event in oncogenesis.