The proto-oncogene c-jun encodes the major component of the transcription factor AP-1 and is thought to have important functions in cell proliferation and differentiation as well as in the cellular response to a variety of external stimuli. To investigate directly the role of c-jun in growth, differentiation and tumorigenicity we generated mouse embryonic stem (ES) cell lines in which both copies of the c-jun gene have been inactivated by homologous recombination. The disruption of both copies of the c-jun gene had no apparent effect on ES cell viability, growth rate and in vitro differentiation potential. Transcriptional activation of the c-jun, junB and c-fos genes following TPA/serum induction was unaffected and efficient transactivation of AP-1 reporter constructs was demonstrated in these cells. Remarkably, subcutaneous injection of ES cells lacking c-Jun into syngeneic mice led to a drastic reduction in the formation of teratocarcinomas. We propose that whereas most of the functions of c-Jun in ES cells appear to be complemented by other Jun proteins in vitro, functional c-Jun protein is essential for efficient tumor growth in vivo.