The myc gene family has been implicated in multiple cell processes including proliferation, differentiation, tumorigenesis, and apoptosis. For its cellular growth promoting function, Myc must heterodimerize with Max. To study the effect of Myc inactivation on the growth and differentiation properties of epithelial tumor cells, we transfected the H-630 human colon cancer cell line with bm-max, a mutant Max protein in which DNA-binding activity has been abolished. Cells expressing high levels of bm-Max grow poorly, and the morphology of both colonies and single cells is altered. Moreover, increased bm-Max expression results in a prolonged G alpha/G1 phase accompanied by induced expression of p21 (WAF1/CIP1), elevated levels of alkaline phosphatase (ALP) activity, and accumulation of large fat granuli within the cells. These distinctive cell characteristics are associated with differentiation processes in numerous malignant cell lines. The results of this study support a model in which sequestering of endogenous Myc and Max proteins into "basic mutant" dimers lacking DNA-binding activity is sufficient both to inhibit proliferation and to induce changes in cell behavior consistent with differentiation.