Recent studies have shown that germ-line determination occurs early in development and that extracellular signaling can alter this fate. This denial of a cell's fate by counteracting its intrinsic signaling pathways through extrinsic stimulation is believed to be associated with oncogenesis. Using specific populations of multipotent skeletal muscle-derived stem cells (MDSCs), we have been able to generate tumors by subjecting cells with specific lineage predilections to concomitant differentiation signals. More specifically, when a stem cell that had a predilection toward osteogenesis was implanted into a skeletal muscle, tumors formed in 25% of implanted mice. When cells predilected to undergo myogenesis were pretreated with bone morphogenetic protein 4 (BMP4) for 4 days prior to implantation, they formed tumors in 25% of mice. These same myogenic predilected cells, when transduced to express BMP4 and implanted into either a long-bone or cranial defect, formed bone, but they formed tumors in 100% of mice when implanted into the skeletal muscle. The tumors generated in this latter study were serially transplantable as long as they retained BMP4 expression. Furthermore, when we impeded the ability of the cells to undergo myogenic differentiation using small interfering RNA to the myogenic regulator MyoD1, we stopped transformation. Based on our findings, we postulate that specific MDSC populations can undergo concomitant signal-induced transformation and that the initial stages of transformation may be due to changes in the balance between the inherent nature of the cell and extrinsic signaling pathways. This theory represents a potential link between somatic stem cells and cancer and suggests an involvement of the niche/environment in transformation.