Using retrovirus-mediated gene transfer into neural transplants, we have expressed the human K-fgf/hst oncogene in the central nervous system. Single-cell suspensions of fetal rat brains were removed at embryonic days 13 and 14, exposed to a retroviral vector encoding the K-fgf oncogene and stereotaxically implanted into the caudate putamen of syngenic adult Fisher rats. Recipient animals were sacrificed at intervals of 6-16 months without evidence of neurological impairment. Mock-infected grafts showed the characteristic histopathological appearance of organotypically differentiated neural transplants. In contrast, grafts exposed to the K-fgf gene exhibited abundant capillary proliferation and capillary angiomas. By in situ hybridization analysis and immunohistochemistry, expression of K-fgf was detected in neural cells adjacent to vascular proliferations. Neurons and glia with abundant K-fgf transcripts were morphologically unaffected. In order to examine the transforming potential of the K-fgf gene in the nervous system, we combined retrovirus-mediated transfer of the K-fgf oncogene with a single transplacental exposure of the donor animals to the neurotropic carcinogen N-ethyl-N-nitrosourea (NEU). However, this combination of transforming agents did not result in tumor formation in the grafts. These results provide evidence for a powerful angiogenic effect of K-fgf on the developing brain in vivo.