We developed a Wilms' tumor-cell culture system to investigate the molecular basis of nephrogenesis and oncogenesis. Several distinct fractions of cells were isolated and characterized from the same tumor specimen. The cells exhibited striking differences in morphology, immunocytochemical staining profiles and cytogenetics. One fraction contained cells with features of epithelium; other cell fractions resembled partially differentiated mesenchyme (blastema or stroma). While the Wilms' tumor-suppressor gene WT1 was not altered, loss of heterozygosity (LOH) and an insertion in intron I of the p53 tumor-suppressor gene occurred in the tumor and the cultured cell types. LOH for RB was detected only in the cultured cells. These findings are consistent with a model of tumor initiation in a pluripotent cell that is able to undergo subsequent differentiation along multiple different lines and which mimics normal nephrogenesis.