The purpose of the studies described in this and the accompanying paper (D.J. Fitzgerald et al., Cancer Res., 46:4642-4649, 1986) was to define the transformed colonies of the rat tracheal epithelial cell transformation system (see P. Nettesheim and J.C. Barrett, CRC Crit. Rev. Toxicol., 12: 215-239, 1984) in terms of differentiation and growth characteristics. Exposure of low-density primary rat tracheal epithelial cell cultures to N-methyl-N'-nitro-N-nitrosoguanidine results in the development of growth-altered colonies of different sizes and morphologies, which can be readily scored 5 wk after treatment. These colonies were classified into four morphological types (I to IV) based on their light microscopic and ultrastructural features. Colonies designated as types I and II were small, had a low cell density, and were composed principally of large, pale-staining (Giemsa) flattened cells with a low nuclear/cytoplasmic ratio. Examination of the fine structure of these colonies revealed a monolayer of extremely attenuated cells containing well-developed Golgi complexes, endoplasmic reticulum, numerous secondary lysosomes, but few tonofilaments and desmosomes. Colonies of types III and IV were large, basophilic (Giemsa), high-density colonies, consisting primarily of closely packed, small, round cells with high nuclear/cytoplasmic ratio. Analysis of the fine structure of these colonies revealed two to four stratified layers of poorly differentiated cells and cells having features of keratinocyte differentiation, as evidence by abundant tonofilament bundles, well-developed desmosomes, and occasional keratohyaline granules. Differential cell counts were carried out at the ultrastructural level on pooled cells from each colony type (except type I); approximately 90% of the cells from type II colonies were large, electron-lucent cells, while this cell type comprised only 20 to 30% of the cells of colonies of types III and IV. The predominant cell type (approximately 60%) in colonies of types III and IV showed clear signs of keratinocyte differentiation. Type IV colonies contained a significantly larger proportion (greater than 20%) of small, poorly differentiated cells than type III (6%) and type II (1%) colonies. A combined autoradiographic and ultrastructural study revealed that the small, poorly differentiated cells were most active in synthesizing DNA and had a labeling index of 60%. Other cell types were far less frequently labeled, particularly the large, electron-lucent cells which had a labeling index of only 10%. Morphometric measurements on fixed and stained colonies disclosed that each colony type differs markedly in cell population size.(ABSTRACT TRUNCATED AT 400 WORDS)