Transformed rat thyroid cells fail to express thyroglobulin. Cells transformed with a Kirsten murine sarcoma virus carrying a temperature-sensitive ras allele lose their transformation phenotype when shifted to the nonpermissive (39 degrees C) temperature. The thyroglobulin promoter, however, remains inactive. Similarly, transfection of these cells with a thyroglobulin promoter fused to a neomycin resistance reporter gene does not produce clones resistant to G418. Treatment of the transfected cells with the DNA demethylating agent 5-azacytidine reactivates the thyroglobulin promoter and yields stable G418-resistant clones. We show that thyroglobulin promoter activity is correlated with the presence of a thyroid-specific nuclear factor, TgTF1. TgTF1 cannot be detected in transformed cells but reappears after treatment with 5-azacytidine at 39 degrees C. Restoration of Ras activity at 33 degrees C leads to the rapid loss of TgTF1 and G418 resistance.