Certain kindreds with low-penetrant (lp) retinoblastoma carry mutant alleles which retain partial tumor suppressor activity and we previously showed that these alleles exhibit defective, temperature-sensitive binding in yeast. To investigate the molecular basis for incomplete penetrance, we studied three recurrent lp alleles and observed approximately 50% of wildtype activity measured by (i) phosphorylation at key regulatory sites, S780, S795, S807/S811, (ii) transcriptional co-activation, and (iii) 'flat-cell' differentiation in mammalian cells in vivo. In addition, we studied a small-cell carcinoma that is homozygous for the R661W allele providing the first analysis of the effect of a naturally occurring lp allele in a human tumor. While we detected abundant expression of the R661W protein, we noted marked instability of both endogenous and recombinant R661W following treatment in vivo with the Hsp90 inhibitor, geldanamycin and stabilization of R661W following heat shock. In addition, we observed a discordant phenotype in the tumor cells with induction of p16 and loss of cyclin D1 consistent with a null RB status combined with homozygous expression of mutant ras which had not been reported previously for RB (-) small-cell cancer. These findings show that a recurrent missense lp allele retains greater functional activity in vivo than predicted from earlier in vitro assays, proposing a role for stabilizing chaperone-like activity in vivo. In addition, these data suggest that reversible protein instability and the requirement for a cooperating mutation may provide a stochastic explanation for the molecular basis of incomplete penetrance in kindreds carrying these alleles.