We have isolated and characterized hybrid cell lines derived from Rat-2 cells transformed by the human T-cell leukemia virus type-I (HTLV-I) Tax protein fused with WI-38 normal human fibroblasts. These hybrid cells (designated as RTW cells) showed contact inhibition after growing to confluency, loss of anchorage-independent growth in 0.33% soft agar, and inability to form tumors in athymic mice. Assays of transcription from the HTLV-I long terminal repeat (LTR) demonstrated that Tax-mediated trans-activation of its own promoter was fully maintained in RTW cells, implying that functional Tax is expressed in these cells. Our results indicate that WI-38 cells contain a suppressor gene(s) which can block Tax-mediated cell transformation without interfering its trans-activation of the HTLV-I LTR.