Patients with longstanding extensive ulcerative colitis have an increased risk of developing colorectal cancer (CRC). There are significant differences in the early pathogenesis of colitis-associated tumors compared with common CRC, whereas the frequency, degree, and significance of microsatellite instability (MSI) as a marker of mismatch repair deficiency in colitis tumors remain unclear. Here we describe the application of the DSS model of chronic colitis to mice with a defect in the Msh2 mismatch repair gene to discern these early events. These mice do not develop CRC spontaneously without an external trigger. The aim of this study was to determine the effect of the Msh2 defect on the frequency and grade of colitis-associated colorectal dysplasia and adenocarcinoma in Msh2-/-, Msh2+/-, and wild-type (Msh2+/+) mice and on the MSI status of the tumors. We show that in mice with chronic colitis, 60% of the Msh2-/- and 29% of the wild-type mice developed high-grade dysplasia or adenocarcinoma, but heterozygosity for the Msh2 defect did not increase tumor susceptibility over wild-type genotype. The largest difference between genotypes was in the frequency of high-grade dysplasia, with 46.7, 8, and 12.5% in Msh2-/-, Msh2+/-, and Msh2+/+ mice, respectively. The Msh2-/- mice developed MSI-high tumors, whereas the majority of the Msh2+/- and wild-type tumors had no MSI. In the Msh2-/- mice, MSI appeared early in non-neoplastic colon tissue, presumably as a result of markedly increased epithelial cell proliferation associated with inflammation. These observations suggest that a homozygous mismatch repair defect predisposes to tumors triggered by chronic inflammation but is not the only factor involved because tumors also developed in the wild-type mice. This model of colitis offers opportunities to characterize the different molecular pathways of carcinogenesis operating in chronic colitis.