Normal dog gallbladder epithelial cells in long-term culture were used as a model to study the morphologic, genetic, and secretory processes associated with the progression to cancer formation. Dog gallbladder epithelial cells cultured on collagen-coated plates grew into polarized monolayers, could be passaged repeatedly, and showed the typical morphological profile of well-differentiated columnar epithelial cells. After cells were exposed to N-methyl-N'-nitro-N-nitrosoguanidine (MNNG) at 10(-5) mol/L for 48 hours, the treated cells grew on plastic and could be cloned. Flow cytometry revealed emergence of an aneuploid cell subpopulation. In organotypic culture, treated cells showed a pseudostratified appearance, with cellular and nuclear pleomorphism. Large and hyperchromatic nuclei were present as well as increased mitotic rate. The proteins of MNNG-treated dog gallbladder epithelial cells showed increased phosphorylation of tyrosine residues. Treated cells showed a decrease in mucin secretion in response to prostaglandin E2, manifesting an altered pattern of mucin secretion. Transforming growth factor-beta failed to inhibit cell proliferation in the MNNG-treated cells compared with the prominent inhibition in normal cells. Together, the data reflected changes representing preliminary steps on the pathway to develop cancer cells. Our results indicate that carcinogenic chemicals can cause measurable chromosomal and cellular modifications to normal biliary epithelial cells in vitro. This model may be useful in understanding the sequential steps in carcinogenesis and affords an opportunity to study chromosomal damage, cytokinetics, changes in molecular genetic markers, and expression, as well as cell biological function during cellular transformation.