We recently reported that a 44 kd glycoprotein secreted by transformed fibroblasts stimulates tyrosine phosphorylation of the product of the neu proto-oncogene and induces differentiation of mammary tumor cells to milk-producing, growth-arrested cells. A partial amino acid sequence of the protein, termed Neu differentiation factor (NDF), enabled cloning of the corresponding complementary DNA. The deduced structure of the precursor of NDF indicated that it is a transmembrane protein whose extracellular portion contains an EGF-like domain that probably functions as a receptor recognition site. In addition, the ectodomain contains one immunoglobulin homology unit. Despite the lack of a recognizable hydrophobic signal peptide at the N-terminus, a recombinant NDF, like the natural molecule, is released into the medium of transfected COS-7 cells in a biologically active form. Northern blot analysis indicated the existence of several NDF transcripts, the major ones being 1.8, 2.6, and 6.7 kb in size. Transformation by the ras oncogene dramatically elevated the expression of NDF in fibroblasts.