A gene transfer model was developed which allows for the identification of transformation pathways in the developing nervous system. Transforming genes were introduced into fetal brain transplants using embryonic CNS as donor tissue and replication-defective retroviral vectors as genetic vehicles. This technique relies on the extraordinary organotypic differentiation capacity of neural grafts and the expression of retrovirally transmitted genes in various cell types of CNS transplants. In contrast to transgenic animals but analogous to sporadic tumor formation, target cells for the retroviral vector develop in an environment of unmodified neural tissue. We have introduced a number of neurotropic oncogenes into fetal brain transplants including genes with an associated tyrosine kinase activity (polyoma medium T, v-src), a novel member of the fibroblast growth factor (fgf) gene family and the SV40 large T antigen. These experiments have demonstrated a significant transformation potential of oncogenes in specific target cells of the brain, provided evidence for a dominant complementary transforming effect of simultaneously expressed ras and myc genes in neural precursor cells and have yielded intriguing model systems for human CNS neoplasms such as the cerebellar medulloblastoma. This review describes the transplantation model, demonstrates several striking phenotypes induced by oncogene expression in neural grafts and elaborates on future prospects of this experimental approach.