We generated a cDNA expression library from a human neuroepithelioma cell line for detection of novel oncogenes by focus formation assay in NIH3T3 cells. A morphologically unique focus was identified upon transfection and the transforming plasmid was isolated. The transforming gene, designated NET1, encoded a predicted protein species of 54 kDa containing the Dbl-Homology (DH) motif. This motif is also present in other growth regulatory molecules including Bcr, Cdc24, Vav, Ras-Grf, Ect2, Ost, Tim and Tiam1, which have been implicated as regulators of small GTP-binding proteins. NIH3T3 cells transfected with NET1 expression plasmid showed altered growth properties in vitro and were tumorigenic when injected into nude mice. In addition, a 2.5 kb cDNA was isolated from a normal human cDNA library which represented the NET1 proto-oncogene contained a 5' extended open reading frame. The fact that the proto-oncogene failed to induce transformation in NIH3T3 cells suggested that the original NET1 oncogene was activated by 5'-truncation. The 3.0 and 2.4 kilobasepair (kb) transcripts of the NET1 gene was ubiquitously expressed in all tissues examined. Using fluorescence in situ hybridization, we localized the NET1 gene to the short arm of human chromosome 10 at band p15.