It has been suggested that streptococcal cell wall-induced arthritis in LEW/N rats resembles a localized neoplasm consisting of, in part, a proliferative and invasive population of fibroblast-like synoviocytes. To further pursue this concept, the synoviocytes from diseased rats were characterized in situ and in vitro for various parameters of" transformation." The spindle-shaped synoviocytes were found throughout the synovium and were the predominant cell type at sites of invasion of bone and cartilage by synovium. They stained intensely for vimentin, a microfilament prominently expressed in immature and transformed mesenchymal cells. They stained variably for Ia antigens and did not exhibit T cell surface antigens nor did they stain with histochemical stains characteristic of monocytes or granulocytes. Electron microscopy confirmed their fibroblastlike morphology and suggested high grade metabolic activity. In primary culture, the abnormal synoviocytes were adherent, grew rapidly and did not contact inhibit. Moreover, they grew under anchorage-independent conditions. These abnormal growth characteristics were inhibited by all-trans retinoic acid. Finally, explants of the arthritic synovium formed short-lived tumorlike nodules in athymic nude mice. These observations, considered in the context of other data, support the concept that the pathologic process represents a thymic-dependent, nonmalignant, locally invasive inflammatory neoplasm.