A cell growth inhibitor was isolated from an avian sarcoma virus-transformed rat cell line (77N1), from which we had previously obtained a novel transforming growth factor, TGF gamma 2. The growth inhibitor (named SGI) was found in cell extract of 77N1 cells and was separable from TGF gamma 2 by means of ion exchange chromatography. SGI inhibited the DNA synthesis of serum-starved, TGF gamma 2-stimulated BALB3T3 cells as well as the spontaneous and TGF-induced colony formation of various cells in semisolid agar. We present evidence that SGI is distinct from the ubiquitous growth modulator TGF beta, and we discuss the possible role of SGI in the neoplastic cell proliferation.