Polyomavirus-induced tumor formation in the adult natural mouse host has been investigated. Tumors were produced in nude mice with the transformation-defective mutant strain NG18 after a long latency period by apparent activation of a cryptic endogenous transforming viral function. A tumor cell line, designated ScB, was established and characterized. Cells from this morphologically distinct line were unusual in that they grew in soft agar but did not form foci. They were highly tumorigenic. They had a 3.1-kilobase major viral transcript that hybridized to probes derived from regions encoding both the T antigens and the structural proteins. ScB cells expressed polyomavirus small T antigen, a slightly altered middle T antigen, and a truncated large T antigen but no capsid proteins. Middle T antigen preserved its interactions with host proteins of 60 and 37 kilodaltons and with c-src. Analysis of cDNA and genomic clones indicated that the stable viral insert in the ScB genome contained multiple copies of the viral B-enhancer. The genome contained two intragenic inversions which created novel early- to late-strand switches. A simple model for the generation of one inversion is proposed that involves the juxtaposition of two stem-loop structures at an illegitimate recombination site; the location of the inverted segment within the integrated sequence permits use of the viral late polyadenylation signal in early-region transcripts, as confirmed by DNA sequence. A repetitive sequence may facilitate recombination at the other inversion site. Both the biological consequences of the observed rearrangements and the structure of the integrated viral DNA suggest that the recombination events are nonrandom