Embryonic stem (ES) cells were used to investigate the target cell specificity and consequences of c‐fos when expressed ectopically during embryonic development. Chimeric mice generated with different ES cell clones selected for high exogenous c‐fos expression were not affected during embryonic development; however, a high frequency of cartilage tumours developed as early as 3–4 weeks of age apparently independent of the extent of chimerism. The tumours originated from cartilagenous tissues and contained many chondrocytes. Expression of exogenous c‐fos RNA and Fos protein was observed during development but was highest in tumour tissues, predominantly in differentiating chondrocytes. A number of primary and clonal tumour‐derived cell lines were established which expressed high levels of c‐fos, c‐jun as well as the cartilage‐specific gene type II collagen and which gave rise to cartilage tumours in vivo, some of which also contained bone. Interestingly, the levels of c‐Fos and c‐Jun appeared to be coordinately regulated in the cell lines as well as in chimeric tissues. Thus, we demonstrate that chondrogenic cells and earlier progenitors are specially transformed by Fos/Jun and therefore represent a novel mesenchymal target cell for c‐fos overexpression.