While familial retinoblastoma has served as the paradigm for the two-hit theory of tumorigenesis and for the concept of the tumor suppressor gene, the etiology of incomplete penetrance of familial retinoblastoma is poorly understood. To address the molecular basis for this phenotype we have studied the functional properties of a mutant Rb gene identified in a kindred with incomplete penetrance of familial retinoblastoma and evidence for regressed retinal lesions (retinomas). In contrast to all previously isolated RB mutant proteins, we demonstrated that the mutant product from this kindred retained the wildtype properties of nuclear localization, the ability to undergo hyperphosphorylation in vivo, and the capacity to suppress growth of RB(-) cells. Protein binding ('pocket') activity, however, was defective defining a new class of RB mutant with partial inactivation. The presence of this unique RB mutant in the germline of obligate carriers with incomplete penetrance and regressed retinal lesions suggests a molecular basis for this phenotype and supports the hypothesis that a minimum 'RB threshold' level of protein binding activity is required to suppress tumorigenesis.