Primary avian tendon (PAT) cells which maintain their differentiated state in culture are rapidly transformed by Rous sarcoma virus. By criteria of morphology, increased rate of 2-deoxyglucose uptake, and loss of density dependent growth control, PAT cells transform as well as their less differentiated counterpart, chick embryo fibroblasts. In addition, the percentage of collagen produced by PAT cells drops on transformation by an order of magnitude, from 23 to 2.5%, but is unaffected by viral replication of a transformation-defective mutant. The responsiveness of normal and transformed PAT cells to various environmental factors changes dramatically upon transformation. Normal PAT cells respond to the presence of ascorbate and high cell density by raising the level of collagen synthesis from 5 to 23%. Transformed PAT cells are totally unresponsive. These and previously reported results lead us to postulate that the break-down in the normal regulatory mechanisms used by the cell to maintain the differentiated state is related to or is responsible for the onset of malignant transformation.