The intronless N-myc2 gene was originally identified as the major target of hepatitis virus insertion in woodchuck liver tumors. Here we report that transgenic mice carrying the N-myc2 gene controlled by woodchuck hepatitis virus (WHV) regulatory sequences are highly predisposed to liver cancer. In a WHV/N-myc2 transgenic line, hepatocellular carcinomas or adenomas arose in over 70% of mice, despite barely detectable expression of the methylated transgene in liver cells. Furthermore, a transgenic founder carrying unmethylated transgene sequences succumbed to a large liver tumor by the age of two months, demonstrating the high oncogenicity of the woodchuck N-myc2 retroposon. Stabilizing mutations or deletions of beta-catenin were found in 25% of liver tumors and correlated with reduced tumor latency (P<0.05), confirming the important role of beta-catenin activation in Myc-induced tumorigenesis. The ability of the tumor suppressor gene p53 to cooperate with N-myc2 in liver cell transformation was tested by introducing a p53-null allele into WHV/N-myc2 transgenic mice. The loss of one p53 allele in transgenic animals markedly accelerated the onset of liver cancer (P=0.0001), and most tumors of WHV/N-myc2 p53+/Delta mice harbored either a deletion of the wt p53 allele or a beta-catenin mutation. These findings provide direct evidence that activation of N-myc2 and reduction of p53 levels act synergistically during multistage carcinogenesis in vivo and suggest that different genetic pathways may underlie liver carcinogenesis initiated by a myc transgene. Oncogene (2000).