A novel oncogene, rsc (rabbit squamous cell carcinoma), has been identified from a DMBA-induced rabbit squamous cell carcinoma using gene transfer and the nude mouse tumorigenesis assay. A full-length cDNA has been isolated and sequenced. rsc has potent tumorigenic activity in nude mice (latency rHR 23A (a rabbit homologue of yeast Rad 23) with a member of the ral-GDS family which we named rgr (ral-GDS related). Deletion analysis demonstrated that the oncogenic potential resides in the Rgr portion of the gene. Rgr is 40% identical overall to Ral-GDS, with identity increasing to 72% over a 100 amino acid region of the catalytic domain. Biochemical experiments indicate that Rgr has GTP/GDP exchange activity for Ral, providing evidence that this pathway is associated with tumorigenesis. The linkage between the Ral pathway and tumorigenesis by a molecule in the Ral-GDS gene family (Ral-GDS being a known effector for Ras) will open the way for the characterization of this pathway and provide an important tool to understand its biological function.