Loss of imprinting (LOI), commonly observed in human tumors, refers to loss of monoallelic gene regulation normally conferred by parent-of-origin-specific DNA methylation. To test the function of LOI in tumorigenesis, we developed a model by using transient demethylation to generate imprint-free mouse embryonic stem cells (IF-ES cells). Embryonic fibroblasts derived from IF-ES cells (IF-MEFs) display TGFbeta resistance and reduced p19 and p53 expression and form tumors in SCID mice. IF-MEFs exhibit spontaneous immortalization and cooperate with H-Ras in cellular transformation. Chimeric animals derived from IF-ES cells develop multiple tumors arising from the injected IF-ES cells within 12 months. These data demonstrate that LOI alone can predispose cells to tumorigenesis and identify a pathway through which immortality conferred by LOI lowers the threshold for transformation.