TGF-a and EGF are structurally related factors that bind to and induce tyrosine autophosphorylation of a common receptor. Proteolytic cleavage of the transmembrane TGFa precursor’s external domain releases several TGF-a species. However, membrane-bound TGF-a forms remain on the surface of TGF-a-expressing cell lines. To evaluate the biological activity of these forms, we modified two cleavage sites in the TGF-a precursor coding sequence, making processing into the 50 amino acid TGF-a impossible. Overexpression of this cDNA in a receptor-negative cell line, partial purification, and N-terminal sequence analysis indicate the existence of two transmembrane TGF-a forms. These solubilized precursors induce tyrosine autophosphorylation of the EGF/TGFa receptor in intact receptorovemxpmssing cells, and anchorage-independent growth of NRK fibroblasts. Ceil-cell contact between TGF-a precursor-overexpressing cells and cells expressing high numbers of receptors also resulted in receptor activation. These findings suggest a role for transmembrane TGF-a forms in intercellular interactions in proliferating tissues.