Macrophage-mediated retroviral transformation of host cells was studied in vivo utilizing the cloned murine macrophage-line GG2EE, generated by in vitro infection of bone marrow cells from C3H/HeJ mice (H-2k) with the acute transforming retrovirus J2 bearing the v-myc and v-raf oncogenes. Because GG2EE macrophages produce the J2 retrovirus, the development of secondary, J2 virus-induced tumors after the injection of the cell line into several strains of mice was evaluated. GG2EE cells proliferated and gave rise to histiocytic tumors in syngeneic mice and in allogeneic athymic Swiss mice. The inoculum of GG2EE cells in allogeneic DBA/2 mice (H-2d) and, to a lesser extent, in BALB/c (H-2d) and BALB/k (H-2k) mice gave rise to a small, solid mass at the injection site. Although the initial tumor was slowly rejected, secondary lymphomas belonging to the B or T cell lineage developed, leading to mouse death. Extensive phenotypic, functional, and chromosomal analyses proved that lymphomas were derived from host T and B cell transformation. Southern and Northern blot studies showed that J2 virus was integrated and expressed in lymphoma cells, demonstrating that the virus was transmitted to the host lymphocytes and suggesting that it was causal in lymphoma development. The existence of close and protracted interactions between GG2EE macrophages and allogeneic host lymphocytes and the presence of viral particles in the area of macrophage-lymphocyte contact were demonstrated by histologic and ultrastructural analysis. Rejection of J2 virus-infected lymphocytes in allogeneic mice suggested that host lymphocyte transformation was dependent upon the macrophage cell type. These results demonstrate that macrophage-derived J2 retrovirus transforms host lymphocytes in vivo in allogeneic mice and that a condition of host alloreactivity is critical for such event.