p53 is the most frequently mutated tumour-suppressor gene in human cancers. Mutant p53 is thought to contribute to carcinogenesis by the acquisition of gain-of-function properties or through the exertion of dominant-negative (DN) effects over the remaining wild-type protein. However, the context in which the DN effects are observed is not well understood. We have therefore generated 'knock-in' mouse embryonic stem (ES) cells to investigate the effects of expressing a commonly found hot-spot p53 mutant, R246S -- the mouse equivalent of human R249S, which is associated with hepatocellular carcinomas. We demonstrate here that R246S mutant p53 exhibits DN effects with respect to target gene expression, cell survival and cell cycle arrest both in cells that are in the undifferentiated state and upon differentiation. The knock-in cells contain higher levels of p53 that localizes to the nucleus even in the absence of genotoxic stress and yet remains non-functional, reminiscent of mutant p53 found in human tumours. In a model based on carbon-tetrachloride-induced liver injury, these cells were consistently highly tumorigenic in vivo, similar to p53(-/-) cells and in contrast to both p53(+/+) and p53(+/-) ES cells. These data therefore indicate that the DN effects of mutant p53 are evident in the stem-cell context, in which its expression is relatively high compared with terminally differentiated cells.