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FLK cells are fetal lamb kidney cells persistently infected with bovine leukemia virus (BLV). 3178 cells, originating from calf-form bovine lymphosarcoma, also showed persistent production of BLV and alteration of cell morphology, after treatment with 5'-iodo-2'-deoxyuridine. In the present paper, the first in vitro transformation of sheep fibroblasts by inoculation with BLV materials from these two cell lines is described. In a few passages after inoculation with these viral materials, morphological alteration occurred. The morphologically altered cells were grown as stable cultures and showed such transformed phenotypes as growth in soft agar medium, increased uptake of 2-deoxy-D-glucose and tumorigenicity in athymic nude mice. This result, together with our previous observation of simultaneous induction of BLV expression and morphological alteration of 3178 cells, suggests the presence of some transforming capacity in these BLV materials similar to that in, for example, murine or avian acute leukemia viruses. The possible acquisition of such capacity during the prolonged passage is discussed.