We have previously described two independent mutant rat fibroblast cell lines that fail to form colonies in soft agar when infected with a v-H-ras-expressing retrovirus, yet still undergo transformation-related morphological alterations in response to this oncogene. We report here that conditioned medium (CM) from non-transformed rat fibroblasts contains an activity that specifically corrects this defect in the mutant cell lines, rendering them capable of anchorage-independent growth in response to ras. The major activity in CM, designated transformation-restoring factor (TRF), is approximately 1300 molecular weight, lipid insoluble, and heat, protease, acid and base stable. Latent activity, distinct from TRF, is also present in CM; several lines of evidence indicate that transforming growth factor (TGF) beta is responsible for this activity. TRF, however, cannot substitute for TGF beta in the phenotypic transformation of NRK cells. TRF activity is decreased in CM of control cells transformed by ras and this response to ras is retained by the mutant cell lines. We propose that whereas wild-type cells transformed by ras may constitutively activate a TRF-regulated pathway, thus becoming independent of TRF for growth in soft agar, these mutants have acquired dependence on an exogenous supply of TRF for this aspect of the transformed phenotype. Cellular activities regulated, directly or indirectly, by TRF may be effectors of the anchorage-independent growth property that is a hallmark of transformed rodent fibroblasts.