The HER-2/neu protooncogene (also called erbB-2) encodes a tyrosine kinase receptor for a polypeptide growth-regulatory molecule. Amplification and overexpression of the gene have been frequently observed in human adenocarcinomas and correlated with poor prognosis. To explore the potential of antibody therapy directed at the HER-2/Neu receptor, we have raised a panel of murine monoclonal antibodies to the human protein, and tested their effect on the tumorigenic growth of HER-2/neu-transfected fibroblasts in athymic mice. We previously reported that the i.p. injected antibodies either inhibited or accelerated the tumorigenic growth of HER-2/neu transfectants in athymic mice. Here we report that these opposing effects were induced also by i.v. injected antibodies, they lasted over 7 weeks, and were probably mediated by distinct epitopes on the receptor molecule. To understand the cellular mechanisms underlying antibody-induced tumor inhibition, we tested the effect of the monoclonal antibodies on various cultured human breast cancer cells. Our analysis revealed that the tumor-inhibitory antibodies specifically induced phenotypic cellular differentiation that included growth arrest at late S or early G2 phase of the cell cycle, markedly altered cytoplasm and nuclear morphology, synthesis and secretion of milk components (casein and lipids), and translocation of the HER-2/Neu protein to cytoplasmic and perinuclear sites. The extent of cellular differentiation by various antibodies could be correlated with their tumor-inhibitory potential, whereas a tumor-stimulatory monoclonal antibody or control immunoglobulin were completely inactive with respect to cellular differentiation. Taken together, our in vivo and in vitro studies correlate the tumor inhibitory potential of monoclonal antibodies to HER-2/Neu with their capacity to induce cellular differentiation in vitro. This observation may hold promise for immunotherapy of cancers that express the HER-2/neu oncogene.