Neonatal human retina cells transformed by the SV40 tumor antigens were shown to leave the cell cycle and differentiate following treatment with agents that raise intracellular levels of cyclic AMP. This was true for both precrisis and immortal cell lines. However, with time, some of the differentiated retinoblasts withdrew neurites and returned to the cell cycle. Attempts to inhibit this process by developing cell lines transformed using SV tsA 58 with a temperature-sensitive phenotype for growth did not enhance but inhibited retinoblast-differentiating capacity. Growth restriction at the nonpermissive temperature was found to activate a senescence pathway. We propose that at the nonpermissive temperature, stable SV40 T-ag-p53 complexes fragment releasing p53, which transactivates p21waf1/cip1/sdi1 with the subsequent accumulation of p21 culminating in growth inhibition and senescence.