The receptor insulin substrate 1 protein (IRS-1) is a specific substrate for insulin receptor tyrosine kinase. Expression and tyrosyl phosphorylation of IRS-1 play an important role during normal hepatocyte growth, and the gene is overexpressed in hepatocellular carcinoma tissue. We determined if IRS-1 overexpression directly contributes to cellular transformation. The human IRS-1 gene was subcloned into a mammalian expression vector driven by the cytomegalovirus early promoter. NIH 3T3 cells transiently transfected with this vector subsequently developed transformed foci. Several stably transfected cell lines were established, and they grew efficiently under low-serum conditions and formed colonies when plated in soft agar. Cell lines overexpressing IRS-1 displayed increased tyrosyl phosphorylation of IRS-1 and association with Grb2 but not with the p85 subunit of phosphatidylinositol 3' kinase. Since Grb2 is a component of the son-of-sevenless-Ras pathway and upstream in the mitogen-activated protein kinase (MAPK) cascade, enzymatic activities of the major components of this cascade, such as MAPK kinase and MAPK were evaluated and found to be substantially increased in three independent cell lines with IRS-1 protein overexpression. Such cells, when injected into nude mice, were highly tumorigenic, and there may be a correlation between the degree of MAPK activation and tumor growth rate. This report describes the generation of a transformed phenotype by overexpression of a molecule without a catalytic domain far upstream in the signal transduction cascade and suggests that prolonged activation of MAPKs by this mechanism may be one of the molecular events related to hepatocellular transformation.