Testicular teratocarcinomas never contain p53 gene mutations even though these tumors express high levels of nuclear p53 protein. We have characterized two murine teratocarcinoma cell lines and find no evidence that endogenous p53-regulated genes are correspondingly upregulated. Differentiation of these teratocarcinoma cells with retinoic acid results in a marked decrease in p53 protein levels but is accompanied by a marked increase in p53-mediated transcriptional activity. Together these results support the hypothesis that the p53 protein in undifferentiated teratocarcinoma cells is transcriptionally inactive and accounts for the lack of selection for p53 gene mutations in this tumor type. These teratocarcinoma cells undergo p53-mediated apoptosis in response to DNA damage, which may explain the routine cures of human testicular tumors with combination chemotherapy.