The vast majority of pancreatic carcinomas have allelic loss of chromosome 18. Detailed analysis revealed a consensus region of homozygous deletion at 18q21.1 in one third of pancreatic carcinomas. The DPC4 gene (also known as SMAD4) was located in this region, and was found to be inactivated by intragenic mutations in another 20% of pancreatic carcinomas. The Dpc4 protein was shown to mediate TGF beta-stimulated gene transcription through sequence-specific binding to DNA. Eleven mutant Dpc4 proteins, identified in human carcinomas, were all found to be impaired in their ability to regulate gene transcription. A functional grouping of the mutant proteins could be made in those that were deficient in DNA binding, those that had impaired nuclear translocation, and those that had affected their transcription activation domain. The results imply gene transcription mediated by Dpc4 as a critical tumour suppressive pathway in pancreatic carcinoma.