We have applied a series of cell clones established from the human teratocarcinoma cell line PA-1 to study the effect of malignant transformation by ras-oncogenes on the regulation of cell growth and differentiation. A particular aim of this study was to identify nuclear gene-regulatory factors that are affected by ras-transformation. We show that a key nuclear target of ras is the transcription factor AP-2. AP-2 function is inhibited through the ras-controlled signal transduction cascade by at least two different mechanisms, i.e. inhibition of an AP-2 coregulatory factor and by expression of an alternatively spliced inhibitory AP-2 protein.