A complementary approach for investigating the molecular mechanisms of capillary blood vessel formation might be the identification of genes whose inappropriate expression results in the subversion of the normal morphogenetic program of endothelial cells. It has been shown recently that transgenic and chimeric mice expressing the polyoma virus middle T (mT) oncogene develop endothelial tumors (Bautch et al., 1987; Williams et al., 1988). In particular, chimeric embryos containing embryonal stem cells that express functional mT have been reported to develop multiple cavernous hemangiomas (ie, large endothelial cell-lined cyst-like cavities) at midgestation. Furthermore, infection of newborn and adult mice with a retrovirus carrying the mT oncogene resulted in the rapid formation of cavernous hemangiomas (Williams et al., 1988). The hemangiomas induced in chimeras and young mice have provided a source of stable endothelioma (End) cell lines, which retain specific endothelial markers and express mT antigen (Williams et al., 1988). Injection of End cells into mice resulted in the rapid formation of hemangiomas, which demonstrates that these cefls are the primary cause of the lesions (Williams et al., 1989). The observation that expression of the mT oncogene severely perturbs the ability of endothelial cells to form normal vascular structures in vivo prompted us to investigate the morphogenetic properties of End cells expressing this oncogene in an in vitro system. In this study, we present evidence that hemangioma-derived End cells expressing the mT oncogene form cystic structures when embedded in fibrin gels, that the aberrant morphogenetic behavior of the End cells is associated with high levels of proteolytic activity, and that addition of serine protease inhibitors to the culture system restores capillary-like morphogenetic properties to the End cells.