A truncated MSX-2 homeoprotein was found to induce flat reversion when expressed in v-Ki-ras-transformed NIH3T3 cells. Although the expression of endogenous MSX-2 gene is low in most of the normal adult tissues examined, it is frequently activated in carcinoma-derived cell lines. Likewise, the gene is inactive in untransformed cells but is transcriptionally activated after transformation by v-Ki-ras oncogene, suggesting that the intact MSX-2 may play a positive, rather than suppressive, role in cell transformation. To test this possibility, we isolated a full-length human MSX-2 cDNA and tested its activities in two cell systems: fibroblast and myoblast. In NIH3T3 fibroblasts, although the gene by itself failed to confer a transformed phenotype, antisense MSX-2 cDNA as well as truncated MSX-2 cDNA interfered with the transforming activities of both v-Ki-ras and v-raf oncogene. In C2C12 myoblasts, MSX-2 was found to suppress MyoD gene expression, as do activated ras oncogenes, under certain culture conditions, and truncated MSX-2 cDNA was found to inhibit the activities of both MSX-2 and ras in this system as well. Our findings not only suggest that the truncated version MSX-2 may act as a dominant suppressor of intact MSX-2 but also raise the possibility that MSX-2 gene may be an important downstream target for the Ras signaling pathways.