The importance of maintaining genomic stability is evidenced by the fact that transformed cells often contain a variety of chromosomal abnormalities such as euploidy, translocations, and inversions. Gene amplification is a well-characterized hallmark of genomic instability thought to result from recombination events following the formation of double-strand, chromosomal breaks. Therefore, gene amplification frequency serves as an indicator of genomic stability. The PALA assay is designed to measure directly the frequency with which a specific gene, CAD, is amplified within a cell's genome. We have used the PALA assay to analyse the effects of the human T-cell leukemia virus type I (HTLV-I) oncoprotein, Tax, on genomic amplification. We demonstrate that Tax-expressing cells are five-times more likely to undergo gene amplification than control cells. Additionally, we show that Tax alters the ability of cells to undergo the typical PALA-mediated G(1) phase cell cycle arrest, thereby allowing cells to replicate DNA in the absence of appropriate nucleotide pools. This effect is likely the mechanism by which Tax induces gene amplification. These data suggest that HTLV-I Tax alters the genomic stability of cells, an effect that may play an important role in Tax-mediated, HTLV-I associated cellular transformation.