Defects in DNA mismatch repair predispose cells to the development of several types of malignant disease. The absence of Msh2 or Mlh1, two key molecules that mediate mismatch repair in eukaryotic cells, increases the frequency of mutation and also alters the response of some cells to apoptosis and cell cycle arrest. To understand the way these changes contribute to cancer predisposition, we examined the effects of defective mismatch repair on the multistep process of pre-B-cell transformation by Abelson murine leukemia virus. In this model, primary transformants undergo a prolonged apoptotic crisis followed by the emergence of fully transformed cell lines. The latter event is correlated to a loss of function of the p53 tumor suppressor protein and down-modulation of the p53 regulatory protein p19Arf. Analyses of primary transformants from Msh2 null mice and their wild-type littermates revealed that both types of cells undergo crisis. However, primary transformants from Msh2 null animals recover with accelerated kinetics, a phenomenon that is strongly correlated to the appearance of cells that have lost p53 function. Analysis of the kinetics with which p53 function is lost revealed that this change provides the dominant stimulus for emergence from crisis. Therefore, the absence of mismatch repair alters the molecular mechanisms involved in transformation by affecting a gene that controls apoptosis and cell cycle progression, rather than by affecting these processes directly.