Mutations in the human adenomatous polyposis coli (APC) gene are responsible for not only familial adenomatous polyposis but also many sporadic cancers of the digestive tract. Using homologous recombination in embryonic stem cells, we recently constructed Apc gene knockout mice that contained a truncation mutation at codon 716 (Apc(delta716)). The heterozygous mice developed numerous intestinal polyps. All microadenomas dissected from nascent polyps had already lost the wild-type allele, indicating the loss of heterozygosity (M. Oshima et al., Proc. Natl. Acad. Sci. USA, 92: 4482-4486, 1995). We also demonstrated that cyclooxygenase 2 is induced in the polyps at an early stage and plays a key role in polyp development (M. Oshima et al., Cell 87: 803-809, 1996). We have analyzed the process of polyp development in these mice both at morphological and molecular levels. A small intestinal microadenoma is initiated as an outpocketing pouch in a single crypt and develops into the inner (lacteal) side of a neighboring villus forming a double-layer nascent polyp. The microadenoma then enlarges and gets folded inside the villus. When it fills the intravillous space, it expands downward and extends into adjoining villi, rather than rupturing into the intestinal lumen. During this course of development, the basement membrane remains intact, and the labeling index of the microadenoma cells is similar to that of the normal crypt epithelium. As in the crypt cells, neither transforming growth factor beta1 nor its receptor type II is expressed in the microadenoma cells. No hot spot mutations in the K-ras gene are found in the microadenoma tissue during these early stages of polyp development. Essentially, the same results have been obtained for the colonic polyps as well. These results suggest that early adenomas in the Apc(delta716) polyps are very similar to the normal proliferating cells of the crypt except for the lack of directed migration along the crypt-villus axis.