The overexpression of the Xmrk oncogene (ONC-Xmrk) in pigment cells of certain Xiphophorus hybrids has been found to be the primary change that results in the formation of malignant melanoma. Spontaneous mutant stocks have been isolated that have lost the ability to induce tumor formation when crossed with Xiphophorus helleri. Two of these loss-of-function mutants were analyzed for genetic defects in ONC-Xmrk's. In the lof-1 mutant a novel transposable element, TX-1, has jumped into ONC-Xmrk, leading to a disruption of the gene and a truncated protein product lacking the carboxyterminal domain of the receptor tyrosine kinase. TX-1 is obviously an active LTR-containing retrotransposon in Xiphophorus that was not found in other fish species outside the family Poeciliidae. Surprisingly, it does not encode any protein, suggesting the existence of a helper function for this retroelement. In the lof-2 mutant the entire ONC-Xmrk gene was found to be deleted. These data show that ONC-Xmrk is indeed the tumor-inducing gene of Xiphophorus and thus the critical constituent of the tumor (Tu) locus.